Internet Advertising Revenues Surpass $4 Billion for Q3

IAB Press Release – Internet Advertising Revenues Surpass $4 Billion for Q3

Yee-haw. Check out the chart.

“The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers LLP today announced that Internet advertising revenues reached an estimated new record of $4.2 billion for the third quarter of 2006. The 2006 third quarter revenues represent a 33 percent increase over $3.1 billion in Q3 2005 and a 2 percent increase over the Q2 2006 total of nearly $4.1 billion.”

Calacanis says the best is yet to be:

“How far will this trend line go? Think 20 more years of similar growth.

Will it get steeper? Absolutely.

Why? Video and audio advertising hasn’t even started to move to the Internet in a major way.

The first 10 years of this industry have been amazing, but the next 20 are going to be insane.”

Kind of cool for me to look at the start of the chart and realize I was collecting ad dollars at Forbes in ’95 before anyone seemed to be counting. Rode the pony right to the dot.bomb peak in Q2’02, came back in Q2’05 and now am on the spend side. This is not going to slow down — I’m with Jason, just watch, it gets really interesting in the next 12 months. Makes me want to be back on the media side … wait, someone punch me.

Om demurs:

“He is right because as online video becomes more popular, the advertising dollars are going to shift to this nascent medium. Those dollars will qualify as Internet advertising, of course. He is wrong, because he is conveniently overlooking the fact that the sequential growth in advertising was essentially flat⁷. “Online advertising will be a useful marketing tool, but no trend goes in a straight line for twenty years,” writes Carl Howe, in his excellent analysis.

Calacanis overlooks the fact that a disproportionate portion of the online advertising dollars is flying into the pockets of a handful of companies. A back of the envelope calculation shows that in the third quarter Yahoo and Google accounted for $2 billion (give or take a few million dollars) in total dollars spent on online advertising in the third quarter 2006. (This is after traffic acquisition costs, and factoring in their international contribution to their total revenues.)”

I think both Calcanis and Malik assume a continuation of the current eyeball model — the gross tonnage model of advertising I’ve posted about previously. That “1.0” world is based on reach and mass with economics measured in cost per thousands, click-through rates, cost-per-click, cost-per-acquisition, and cost-per-lead. Behavioral models, such as those promoted by Tacoda; or RSS models such as Federated’s, give a bit more precision and reduce the “gross” to “less gross” but the industry is still waiting for a way to monetize the long tail and give some economic value to engagement.

I can’t predict the next big thing in advertising, but will assume the next Bill Gross is working on the breakthrough that will start the cycle all over again. That assumption may be like wishing for a pony for Christmas, but I believe it is a shift in models, not the rise of new mediums — ie video — that will drive the continued growth.

I need to find where interactive now stands in the overall ad industry mix. Last I checked it had passed billboards.

Author: David Churbuck

Cape Codder with an itch to write View all posts by David Churbuck