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IAB/PricewaterhouseCoopers Reports $1.46 Billion

First Six Months Total $2.98 Billion

New York, NY – October 21, 2002 Internet advertising revenue in the United States totaled $1.46 billion for the second quarter of 2002 according to PricewaterhouseCoopers/IAB Internet Ad Revenue Report. The total reflects a 4.1 percent decline from Q1 2002, and a 21.9 percent decline from Q2 2001. The first six months revenue for 2002 totaled $2.98 billion, off 20.8 percent from the comparable period of 2001. Additionally, the report revises it’s Q1 2002 estimate to $1.52 billion from the $1.55 billion reported earlier this year.

The Interactive Advertising Bureau (IAB) sponsors the Internet Ad Revenue Report, which is conducted independently by the New Media Group of PricewaterhouseCoopers (PwC). Revenues are reported directly to PwC and represents information from all companies that garner meaningful online advertising revenues. The results reported are reported in aggregate only and represent the most accurate measurement of online advertising revenues as they are compiled directly from information supplied by companies selling advertising on the Internet. The IAB sponsors the report as a service to its membership.

“The results for the first half of this year come as no surprise to the industry and continue to reflect the weakened media market which all ad sectors have experienced for the first half of 2002,” said IAB President & CEO, Greg Stuart. “That said, we are heartened by some very clear indicators that the overall market is improving. In addition to reports of growth from certain other media sectors, a number of online ad sellers, in their recent SEC filings and public statements, have indicated substantial growth as well. The industry fundamentals — growing installed base of Internet users, more attractive demographics, and higher accountability – are firmly entrenched, and find our industry on solid ground. While ‘recovery’ may be too strong a word at this time, it is quite possible, especially as we head into the traditionally robust fourth quarter, that a turnaround is in the offing.

“The keys now are to learn from the results of research. Today’s announcement of learnings derived from the McDonald’s/IAB Cross Media Optimization Study clearly support increases in the online portion of ad budgets. This sort of data should be music to the ears of marketers, as they seriously look to the interactive medium as the outlet of choice, they now have more compelling data to prove their point,” Stuart concluded.

In Q2 2002, the consumer-targeted category continued to be the largest overall segment for online advertising (32%) with the retail segment (44%) driving these ad revenues.

Q2 – 2002 Q2 – 2001
Consumer 32% 30%
Computing 19% 18%
Financial Services 14% 13%
Media 12% 10%
Telecom 7% 8%

Consumer Category Breakout – Top 5

Q2 – 2002 Q2 – 2001
Retail 44% 51%
Auto 18% 11%
Music 12% 10%
Travel 15% 11%
Entertainment 4% 5%

The Big Continue to Lead

Large online ad selling companies continue to account for the lion’s share of online ad revenue, as noted by the numbers below. Industry-wide revenues being consolidated within the large media companies mirrors most of the other media sectors Q2 – 2002 Q2 -2001

Q2 – 2002 Q2 – 2001
Top 10 Media
76% 76%
Top 25 Media
89% 89%
Top 50 Media
97% 96%

CPM is the Dominant Pricing Model.

The CPM pricing model is the model of choice, comprising 46 percent of all deal revenues in the second quarter of 2002, while straight performance contracts were at 15 percent, and hybrid deals, a combination of CPM and performance totaled 39 percent. Of all deals, 90% were cash and 10% barter in the second quarter of this year.

Ad Formats

While the percentage use of various formats has remained fairly constant, overall format clutter has diluted the importance of categories other that the top five, which account for the vast majority of revenue. Formats tracked and their respective share of Q2 -2002 and Q1 – 2002 revenue are:

Q2 – 2002 Q2 – 2001
Banners 32% 36%
Sponsorships 24% 28%
Classifieds 15% 16%
Key Word Search 9% 3%
Slotting Fees 8% 8%
Other 12% 9%

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, and represents data from all companies that sell meaningful online advertising revenues. 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.

About PwC
PricewaterhouseCoopers (www.pwcglobal.com), the world’s largest professional services organization, helps its clients build value, manage risk and improve their performance. The PricewaterhouseCoopers New Media Group — with offices in New York, Los Angeles, Seattle, San Francisco Bay Area, and Boston — combines content and technology specialists to provide comprehensive service to dynamic entrepreneurial companies. Services include business assurance services, ad delivery and privacy attestation and consultation, assistance with mergers and acquisitions, tax planning and compliance, capital structuring and employee benefits and executive compensation packages.

About the IAB
Founded in 1996, the Interactive Advertising Bureau (IAB) is the leading interactive advertising association and represents companies responsible for selling over 75% of online advertising in the United States, including; AOL, CNET, MSN, Overture Services, Walt Disney Internet Group, Yahoo, and over one hundred others. Its activities include evaluating and recommending standards and practices, fielding research to document the effectiveness of the interactive medium and educating the advertising industry about the use of interactive advertising. Membership includes companies that are actively engaged in, and support the sale of interactive advertising.

Marla Nitke IAB