IAB Internet Advertising Revenue Report

IAB Internet Advertising
Revenue Report
An Industry Survey Conducted by PricewaterhouseCoopers
and Sponsored by the Interactive Advertising Bureau (IAB)
2007 Full-Year Results
May 2008
PwC

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Table of Contents
Background
2
Executive Summary
3
Detailed Findings
4
2007 Fourth Quarter and Full Year Results
Annual and Quarterly Trends
Advertising Formats
Industry Concentration
Industry Category Spending
Pricing Models
Industry Comparisons
Appendix
14
Definitions
Survey Scope and Methodology
IAB Board Officers and Directors
Organization Profiles

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Background
About the IAB Internet Advertising Revenue Report
Conducted by PricewaterhouseCoopers LLP on an ongoing basis, with results released
quarterly, the “Internet Advertising Revenue Report” was initiated by the Interactive Advertising
Bureau (IAB) in 1996. This report utilizes data and information reported directly to
PricewaterhouseCoopers LLP, in addition to information available publicly, by companies
representing thousands of Web sites, in addition to other online ad selling companies.
The results reported are considered the most accurate measurement of Internet/online
advertising revenues because the data is compiled directly from information supplied by
companies selling advertising online. All-inclusive, the report includes data reflecting online
advertising revenues from Web sites, commercial online services, e-mail providers, as well as
other companies selling online advertising.
The report is conducted independently by PricewaterhouseCoopers LLP on behalf of the IAB.
PwC does not audit the information and provides no opinion or other form of assurance with
respect to the information. Only aggregate results are published and individual company
information is held in strict confidence with PricewaterhouseCoopers LLP. Further details
regarding scope and methodology are provided in the appendix to this report.
David Silverman
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
2

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Executive Summary
IAB Internet Advertising Revenue Report
2007 Full-Year Highlights
Internet advertising revenues (“revenues”) in the United States totaled $21.2 billion for the full year 2007,
with Q3 accounting for $5.3 billion and Q4 totaling $5.9 billion. Internet advertising revenues for the full
year of 2007 increased 26 percent over 2006.
Key trends underlying 2007 results:
For the fourth consecutive year, revenues post record results—Total revenues for the 2007 fourth
quarter ($5.9 billion) increased 13 percent from the 2007 third-quarter total of $5.3 billion, and 24
percent from the 2006 fourth-quarter total of $4.8 billion. Full year 2007 Internet advertising revenues
totaled $21.2 billion, up 26 percent versus full year 2006 revenues of $16.9 billion.
“This achievement is a testament to the continued vitality of interactive. Explosive innovation in the
industry is providing marketers with new and unique ways to reach consumers – it’s a very exciting
time.”
—Randall Rothenberg, President and CEO, IAB
Consumer Advertisers lead spending—Consumer-related advertisers accounted for the largest
category of revenues at 55 percent of 2007 full year revenues, up from 52 percent from the full year
2006. Financial Services, the second-largest category, accounted for 15 percent, followed by
Computing advertisers at 11 percent. Within the Consumer category the biggest sub-categories are
Retail (47 percent of 2007 consumer revenue category), Automotive (21 percent), Leisure (13 percent),
Entertainment (9 percent) and Packaged Goods (8 percent).
“Despite the current state of economic uncertainty, 2007 was another record year and the 13th
consecutive record quarter. Interactive advertising is not just the future, it is the here and now, as it
represents a meaningful and growing component of US advertising and marketing spend.”
—David Silverman, Partner, PricewaterhouseCoopers LLP
Search continues to lead, followed by Display, Classifieds and Lead Generation—Search
revenue accounted for 41 percent of 2007 full year revenues, up from the 40 percent for the full year
2006. Display advertising, Classifieds, and Lead Generation accounted for 34 percent, 16 percent, and
7 percent of 2007 full year revenues respectively.
PricewaterhouseCoopers LLP
3

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Detailed Findings
2007 Fourth-Quarter Revenues Totaled Just Over $5.9 Billion
Online ad sellers reported aggregate revenues totaling $5.9 billion for the fourth quarter of 2007.
Total 2007 fourth quarter revenues were $679 million or 12.9 percent higher than the third quarter
of 2007, and $1.2 billion or 24.3 percent higher than the fourth quarter of 2006.
2007 Q3 vs. 2007 Q4
$5,946
$6,000
13%
$5,267
$5,000
$4,000
$3,000
$ millions
$2,000
$1,000
$0
2007 Qtr 3
2007 Qtr 4
2006 Q4 vs. 2007 Q4
$5,946
$6,000
24%
$4,784
$5,000
$4,000
$ millions
$3,000
$2,000
$1,000
$0
2006 Qtr 4
2007 Qtr 4
PricewaterhouseCoopers LLP
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Historical Fourth-Quarter Revenue Trends
Fourth-quarter revenues have increased significantly on a year-over-year percentage and dollar basis for the fifth
consecutive year, after declining in 2001 and 2002.
Fourth-Quarter $ Revenue—1999 through 2007
$5,946
$6,000
$4,784
$5,000
$4,000
$3,608
$3,000
$2,694
$2,123
$2,182
$ millions
$2,000
$1,777
$1,641
$1,580
$1,000
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
Quarterly Revenues Post Record Levels
2007 fourth-quarter revenues recorded the highest quarterly revenue total since reporting began in 1996.
Since the third quarter of 2002 revenues have increased 20 of the past 21 consecutive quarters.
Quarterly $ Revenue Growth Comparisons—2000–2007
$8,087M
$7,134M
$6,010M
$7,267M
$9,626M
$12,542M
$16,879M
$21,206M
$6,000
$ 5, 946
$ 5, 094
$ 5, 267
$5,000
$ 4, 784
$ 4, 899
$ 4, 061
$ 4, 186
$4,000
$ 3, 608
$ 3, 848
$ millions
$ 2, 985
$3,000
$ 2, 694
$ 3, 147
$ 2, 369
$ 2, 182
$ 2, 802
$ 1, 872
$ 2, 091
$ 1, 848
$2,000
$ 1, 660
$ 1, 641
$ 1, 580
$ 2, 230
$ 2, 182
$ 1, 922 $ 1, 951
$ 1, 458
$ 2, 123
$ 1, 773
$ 1, 793
$ 1, 520
$ 1, 632
$ 1, 451
$1,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2000
2001
2002
2003
2004
2005
2006
2007
PricewaterhouseCoopers LLP
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Annual Revenues Exceed $21 Billion
Annual revenues for 2007 totaled $21.2 billion, $4.3 billion or 25.6 percent higher than reported for 2006.
Annual Revenues—2006 vs. 2007
$21,206
$20,000
26%
$16,879
$15,000
$10,000
$ millions
$5,000
$0
2006
2007
Historical Revenue Mix—First Half vs. Second Half
$22,000
$21.2B
$20,000
$18,000
$16.9B
$16,000
$11,213 53%
$14,000
$12.5B
$8,970 53%
$12,000
$9.6B
$10,000
$ millions
$6,755 54%
$8.1B
$8,000
$7.1B
$7.3B
$6.0B
$5,027 52%
$6,000
$4,074 50%
$4.6B
$3,414 48%
$3,975 55%
$9,993 47%
$3,032 50%
$4,000
$7,909 47%
$2,994 65%
$5,787 46%
$2,000
$4,013 50%
$4,599 48%
$3,720 52%
50%
45%
$2,978
$3,292
$1,627 35%
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
First Six Months
Last Six Months
PricewaterhouseCoopers LLP
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Historical Revenue Performance
Annual and Quarterly Revenue Growth Comparisons
% GROWTH
% GROWTH
$ Rev Millions
Qtr/Qtr
Year/Year
$ Rev Millions
Qtr/Qtr
Year/Year
1Q02
$1,520
-7%
-19%
1Q97
$130
18%
333%
2Q02
$1,458
-4%
-21%
2Q97
$214
66%
313%
3Q02
$1,451
-1%
-18%
3Q97
$227
6%
200%
4Q02
$1,580
9%
-4%
4Q97
$336
48%
205%
Total 2002
$6,010
-16%
1Q03
$1,632
3%
7%
Total 1997
$907
239%
2Q03
$1,660
2%
14%
1Q98
$351
5%
171%
3Q03
$1,793
8%
24%
2Q98
$423
20%
97%
4Q03
$2,182
22%
38%
3Q98
$491
16%
116%
Total 2003
$7,267
21%
4Q98
$656
34%
95%
1Q04
$2,230
2%
37%
Total 1998
$1,920
112%
2Q04
$2,369
6%
43%
3Q04
$2,333
-2%
30%
1Q99
$693
6%
97%
4Q04
$2,694
15%
24%
2Q99
$934
35%
121%
Total 2004
$9,626
33%
3Q99
$1,217
30%
148%
1Q05
$2,802
4%
25%
4Q99
$1,777
46%
171%
2Q05
$2,985
7%
26%
Total 1999
$4,621
141%
3Q05
$3,147
5%
35%
1Q00
$1,922
8%
177%
4Q05
$3,608
15%
34%
Total 2005
$12,542
30%
2Q00
$2,091
9%
123%
1Q06
$3,848
7%
37%
3Q00
$1,951
-7%
60%
2Q06
$4,061
6%
36%
4Q00
$2,123
9%
19%
3Q06
$4,186
3%
33%
Total 2000
$8,087
75%
4Q06
$4,784
14%
33%
1Q01
$1,872
-12%
-3%
Total 2006
$16,879
35%
1Q07
$4,899
2%
27%
2Q01
$1,848
-1%
-12%
2Q07
$5,094
4%
25%
3Q01
$1,773
-4%
-10%
3Q07
$5,267
3%
26%
4Q01
$1,641
-7%
-23%
4Q07
$5,946
13%
24%
Total 2001
$7,134
-12%
Total 2007
$21,206
26%
Industry Revenue Concentration Remains High
Online advertising continues to remain concentrated, with the ten leading ad-selling companies accounting for 69 percent
of total revenues in the fourth quarter of 2007, consistent with the 69 percent reported for the fourth quarter of 2006.
Companies ranked 11th to 25th accounted for 11 percent of revenues for the fourth quarter of 2007, while companies
ranked 26th to 50th accounted for 9 percent in the fourth quarter of 2007.
% Share of total revenues
100
90
TOP 50
89%
80
TOP 25
80%
70
l
a
60
Top 50
Tot
50
companies
command
% of
69%
40
89% of online
ad market
TOP 10
30
20
$8,087M $7,134M $6,010M $7,267M
$9,626M $12,542M $16,879M $21,206M
10
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2000 2001 2002 2003
2004 2005 2006
2007
PricewaterhouseCoopers LLP
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Search, Display and Classifieds Lead Ad Formats – 2007 Fourth Quarter Results
Search revenues account for 42 percent of 2007 fourth quarter revenues, up from the 41 percent reported for the same
period in 2006. Search advertising revenues totaled $2.5 billion in the fourth quarter of 2007, up 27 percent from the fourth
quarter of 2006, when Search revenues totaled $2.0 billion.
Display-related advertising revenues totaled $2.1 billion or 35 percent of total revenues during the fourth quarter of 2007,
up 32 percent from the $1.6 billion (33 percent of total) reported in the fourth quarter of 2006. Display-related advertising
includes Display ads (21% or $1.2 billion of 2007 fourth quarter revenues), Rich Media (9% or $535 million), Digital Video
(2% or $119 million) and Sponsorship (3% or $178 million).
Classifieds revenues accounted for 14 percent of 2007 fourth quarter revenues or $832 million, down slightly from the 16
percent ($765 million) reported in the fourth quarter of 2006.
Lead Generation revenues accounted for 7 percent of the 2007 fourth quarter revenues or $416 million, down from the 8
percent or $383 million reported in the fourth quarter of 2006.
Internet Ad Revenues by Advertising Format
% of 2007 Fourth Quarter Revenues
Lead Generation
7%
Digital Video
2%
Display Ads
Rich Media
21%
9%
Sponsorship
E-mail
3%
2%
Classifieds
14%
Search
42%
Total–$5.9 Billion
% of 2006 Fourth Quarter Revenues
Lead Generation
8%
Display Ads
Rich Media*
23%
8%
E-mail
2%
Sponsorship
2%
Classifieds
16%
Search
41%
Total–$4.8 Billion
*Rich Media 2006 includes Digital Video; definition on page 15 of report.
PricewaterhouseCoopers LLP
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Search, Display and Classifieds Lead Ad Formats – 2007 Full Year Results
Search remains the largest revenue format, accounting for 41 percent on 2007 full year revenues, up from the 40 percent
reported in 2006. Search advertising revenues total $8.8 billion for the full year 2007, up 30 percent from the $6.8 billion
reported in 2006.
Display-related advertising totaled $7.1 billion, or 34 percent of full year 2007 revenues compared to $5.4 billion (32
percent of total reported in 2006. Display-related advertising includes Display ads (21% or $4.5 billion of 2007 full year
revenues), Rich Media (8% or $1.7 billion), Digital Video (2% or $324 million) and Sponsorship (3% or $636 million).
Classifieds revenues accounted for 16 percent of 2007 full year revenues or $3.3 billion, down slightly from the 18 percent
($3.1 billion) reported for 2006.
Lead Generation revenues accounted for 7 percent of the 2007 full year revenues or $1.6 billion, down from the 8 percent
or $1.3 billion reported in 2006.
Internet Ad Revenues by Advertising Format
% of 2007 Full-Year Revenues
Lead Generation
7%
Digital Video
2%
Display Ads
Rich Media
21%
8%
E-mail
Sponsorship
2%
3%
Classifieds
16%
Search
41%
Total–$21.2 Billion
% of 2006 Full-Year Revenues
Lead Generation
8%
Rich Media*
Display Ads
7%
22%
E-mail
2%
Sponsorship
3%
Classifieds
Search
18%
40%
Total–$16.9 Billion
*Rich Media 2006 includes Digital Video; definition on page 15 of report.
PricewaterhouseCoopers LLP
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