Online Ad Revenue Reaches $12.5 Billion in 2005
U.S. online advertising revenue grew for a third consecutive year as keyword ads targeted to specific search queries continued to dominate, an industry group said Thursday.
Online advertising set a record of $12.5 billion last year, a 30% increase from the previous high of $9.63 billion in 2004, the Interactive Advertising Bureau said.
Search remained the largest generator of revenue, accounting for $5.1 billion, or 41%, of the 2005 figures. That’s slightly higher than the 39% share in 2004.
Internet ads also set a record for the fourth quarter, with revenue totaling $3.6 billion, a 34% jump from the same period in 2004 and 15% more than the previous record of $3.1 billion, set in the third quarter of 2005.
“Interactive advertising continues to experience tremendous growth as marketers experience its overall effectiveness in building brands and delivering online and offline sales,” Greg Stuart, chief executive of the advertising bureau, said in a statement.
Stuart said he expected growth to continue as advertisers found additional ways to exploit opportunities in broadband video, Internet-based television and online games.
Despite the record revenue, Internet advertising represents only 5% of all U.S. advertising revenue, up slightly from 4% in 2004, PricewaterhouseCoopers said in the study it conducted for the advertising bureau.
Nonetheless, in a report released this month, Merrill Lynch & Co. media analyst Lauren Rich Fine estimated that spending on Internet ads this year would increase 27%, surpassing magazines and the Yellow Pages -- both more established media markets.
Search has been the big driver in online advertising in recent years and accounts for virtually all the revenue at search engine leader Google Inc. The Mountain View, Calif.-based company helped pioneer the format in which text ads are displayed alongside regular search results, customized to the subject on which a user is searching.
Banner and other display ads made up the second-largest category, accounting for 21% of 2005 revenue. Online classified ads followed at 17%.
Consumer-related ads, such as those for drugstores, toys, retail stores, travel services and cars, accounted for half of last year’s revenue. Financial services and computing made up about 12% each, and telecommunication firms accounted for 7%.
