IAB: Online Ad Spending Grew 10.6 Percent In ’08

Although last year was a difficult one for all parts of the advertising business, online ad spending still managed to grow 10.6 percent to $23.4 billion, according to a report from the Interactive Advertising Bureau and PricewaterhouseCoopers. The IAB is hosting a call now and discussing the findings. In keeping with other trends in the economy, online had been holding its own, until it was dragged down along with every other business in Q4. Release

Q4 revenues hit the $6.1 billion mark, but were just a 2.6 percent increase from the year before, which had revenues of $5.9 billion. As other reports have shown the past year, search has been the primary growth driver for online ads, rising 19.8 percent over 2007. Digital video, though still a small contributor, more than doubled its revenue with an increase to $734 million from $324 million in ’07.

eMarketer cuts ’09 forecast in half: Separately, eMarketer re-calibrated their previous ad spending numbers for this year and last year, based on the new IAB figures after taking stock of a wide array of worsening economic signs. The researcher now expects 2009 online ad spend to rise 4.5 percent to $24.5 billion; it previously anticipated an 8.9 percent gain to $25.7 billion. More after the jump.

Flattening out: David Silverman, a partner with PwC, provided a look at annual and quarterly trends. He noted that online ad revenues had the lowest sequential Q3 to Q4 growth rate it had recorded, and the first non-double digit growth rate since 2000. The same trend was found from Q407 to Q408. In general, Silverman saw a “flattening out” among display and sponsorships, while search continued to surge. Meanwhile, classified has declined over the past two years. In terms of industry categories, retail declined 3 percent year-over-year, while financial services slipped 2 percent. Interestingly, auto remained flat, which is considered something of a victory given the particular troubles affecting that industry.

Hooray for stability: Prof. Peter Fader, of the Wharton School of The University of Pennsylvania, was brought in to provide a look at the “silver lining in otherwise cloudy skies.” In other words, while online advertising is not growing as it was before, considering the state of things, stability is something to celebrate. As for the issue of performance based ads versus branding, Fader said that this represented a false battle. In particular, he defended the cumulative affect of display advertising, especially when combined with search. “We might say that banner ads don’t lead us to a particular action, but that’s not true. Display ads do have an impact, even if people are clicking on the ads. They’re seeing them, and there is tremendous value in brand awareness. Branding and direct response is blurring together. The walls between them within agencies are falling down. This is an area where, paradoxically, we do want to see it become more difficult to determine what the users are responding too.” A full breakdown of individual segments is included in the IAB/PwC’s chart below.