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IAB/PWC Report $1.66 Billion Internet Ad Revenue For Q2 2003 – Up 13.9 Percent from the Second Quarter 2002

Upward Trend Continues. Third Consecutive Quarterly Growth

New York, NY (November 11, 2003) -The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers today released the Internet Ad Revenue Report covering Q2 and the first six months of 2003. Internet advertising revenues (U.S.) reported for the first six months of 2003 were $3.29 billion – a 10.5% increase over the first half of 2002. Internet advertising revenue totaled $1.66 billion for the second quarter of 2003, representing a 13.9% increase over same period 2002. This report replaces its previous Q1 2003 estimate of $1.69 billion with the actual of $1.63 billion. Q2 2003 revenues represent a 1.7% increase over Q1 2003.

“For the third quarter in a row, revenue figures mirror the reality of the marketplace, which includes advertiser success and revolutionary research that proves online advertisings effectiveness. Our prognosis for a continued and steady recovery is being realized and the outlook remains bright,” said Greg Stuart, President & CEO of the Interactive Advertising Bureau (IAB). “With Internet usage and broadband adoption continuing to escalate, marketers are throwing their weight and dollars behind interactive advertising.”

“Recent revenue results strongly suggest the industry has rebounded, reflecting improving fundamentals: increased buy-side demand, firming prices, an improved selling process and continued strength in broadband user adoption” said Pete Petrusky, Director, New Media, PricewaterhouseCoopers. “Other factors including increased performance deals, fewer non-cash deals and continued investment from the largest buyer segment consumer advertisers, bode well for the industry as a whole.”

“Advertisers operate within an increasingly complex landscape, however, there is no denying that consumer Internet media usage continues to rise. The Internet holds the promise of delivering the right audience at the right time – a winning combination for marketers of any type, and thus we should continue to see a favorable environment for increased Internet ad spend,” said Tom Hyland, Chair, PricewaterhouseCoopers New Media Group. The 2003 first half Internet Advertising Revenue report contains breakouts detailing the performance of particular industry segments. These include:

Ad Formats Keyword search continued to demonstrate its strength as the lead indicator of growth for the overall interactive ad industry, representing 31% of total ad revenues for the second quarter of 2003 – more than tripling its stake over Q2 2002 and rising nearly 13% in total ad revenues over Q1 2003. Rich Media doubled its share, increasing from 3% in Q2 2002 to 6% in Q2 2003, possibly reflecting advertisers recognition of faster broadband adoption, which in turn offers more rich media opportunities. Internet ad revenues broken down by ad formats are:

2Q 2003 2Q 2002
Display Advertising (Formerly banners) 22% 32%
Sponsorships 11% 24%
Classifieds 18% 15%
Keyword Search 31% 9%
Slotting Fees 4% 8%
Interstitial 3% 3%
Email 4% 4%
Rich Media 6% 3%
Referral 1% 2%

Ad Categories — In the second quarter of 2003, consumer advertisers continued to spend the most dollars on online advertising, even slightly increasing their share for the second quarter. Within the Consumer category, retail consumer advertisers continued to dominate the space, again comprising the largest segment in the major consumer category, spending 44% of total dollars. For the first time, included in the full report, the 2003 Consumer breakout includes the categories of packaged goods and entertainment.

2Q 2003 2Q 2002
Consumer 35% 32%
Computing 20% 19%
Financial Services 13% 14%
Media 12% 12%
Business Services 10% 6%

Pricing Models The performance of search advertising caused a ripple effect in pricing models, and paving the way for straight performance deals to outperform hybrid, capturing 35% of 2003 second-quarter revenues, up from 15% reported for the same period in 2002. Hybrid deals, a combination of CPM and performance, declined to 20% in the second quarter of 2003 (down from 39% last year). The CPM pricing model remained relatively unchanged, comprising 45% of all deal revenues in the second quarter of 2003.

About the Interactive Advertising Revenue Report
Conducted by the New Media Group of PricewaterhouseCoopers on an ongoing basis, with results released quarterly, the “Advertising Revenue Report” was started by the IAB in 1996. The results reported are the most accurate measurement of online advertising revenues because the data is compiled directly from information supplied by companies selling advertising on the Internet. All-encompassing in nature, the survey includes data concerning online advertising revenues from Web sites, commercial online services, free e-mail providers, and all other companies selling online advertising.

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