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Banner Days Growing Scarce in Online Advertising

Oh, say, that banner ad still waves goodbye.

The bumper sticker-shaped banner advertisement that has been the mainstay of Internet advertising over the past five years continues to decline in popularity, according to the latest numbers from an ongoing, multiyear survey.

Meanwhile, total Internet advertising grew slightly from the third to fourth quarter of 2000, reversing a sequential decline that had taken place from the second to third quarter as the dot-com-fueled ad market imploded.

The numbers, released Monday by the PricewaterhouseCoopers accounting and consulting firm, confirm plentiful anecdotal evidence that the glory days of Internet advertising revenue growth are visible only in the rearview mirror, and that the online advertisers are still sorting out how best to use the medium.

In the fourth quarter of 2000, according to Monday's announcement, Internet advertising amounted to $2.2 billion, up 22% from the fourth quarter of 1999 and up 9% sequentially from ad sales in the third quarter of 2000.

Temporarily, at least, the numbers reverse the trend from the second to third quarter of 2000, when online advertising declined 6.5%, according to PricewaterhouseCoopers.

But year-over-year ad growth is slowing; the $8.2 billion in online advertising for all of 2000 amounts to 78% growth from 1999 revenues. That year's revenues, in fact, grew 141% over 1998.

"As our base gets bigger and bigger, the days of double and triple digit growth are gone, as they would be for any industry that grew at the rate that the Internet did," said a statement from Rich LeFurgy, chairman of the Interactive Advertising Bureau (formerly the Internet Advertising Bureau). PricewaterhouseCoopers has conducted the survey on behalf of the IAB since 1996, using confidential data supplied by companies that sell online advertising.

Though the IAB wouldn't forecast industry revenue for 2001, early indicators aren't positive. Analysts are forecasting a 25% decline in revenue for the year. Though AOL Time Warner reported that online ad sales grew from the fourth quarter of 2000 to the first quarter of 2001, Yahoo! has reported a major decline.

Reflecting advertiser dissatisfaction with the banner format, the percentage of ad revenue accounted for by banner ads has declined sharply over the past few quarters. In the last three months of 2000, banner ads reaped 40% of online ad revenue, down from a high of 55% in the third quarter of 1999. Online classifieds, in contrast, have been growing in popularity: They accounted for 10% of ad sales in the fourth quarter of 2000, up from 4% in the first quarter of the year.


George Mannes, TheStreet.com. April 23, 2001

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