Twelve Percent Decline For Full Year 2001 Reflects Overall Weak Ad Market
Survey Shows Over 40% of Top 25 Online Ad Sellers Profitable in 2001, Over 70% Expect Profitability in 2002
New York, NY – May 23, 2002 – Reflecting steep declines across the board in all ad sectors in 2001, Internet advertising revenue in the U.S. declined 7.5 percent in the fourth quarter of 2001, totaling $1.7 billion. Internet advertising for all of 2001 totaled $7.2 billion, down 12 percent versus 2000. The Interactive Advertising Bureau (IAB) sponsors the Internet Ad Revenue Report, which is conducted independently by the New Media Group of PricewaterhouseCoopers (PwC). The IAB notes that overall weak revenue results were not unexpected, and continues to mirror the experience of the entire advertising environment. In fact, the Internet ad results compare favorably to many other, more established ad sectors, which experienced steeper declines during the reporting period.
For example, data compiled by eMarketer, a leading provider of eBusiness statistics, shows that CMR The Myers Report and McCann Erickson all rate the decline in ad revenue for broadcast television at 11.8%, 12% and 13.8% respectively for 2001. Additionally, national spot radio decreased by 20.4% according to CMR and 19.4% according to McCann in 2001. The IAB and PwC have also announced they will now issue a “top-line” report covering the first and third quarters, followed by detailed findings provided in the semi-annual full reports. The 2002 first quarter results will be announced at the end of May 2002.
“We believe that in assessing the results of Internet advertising in 2001, it would be a mistake to limit the comparison to the results for 2000, the banner year for all advertising sectors,” said Greg Stuart, President & CEO of the Interactive Advertising Bureau (IAB). “It’s no secret that the slowing economy, combined with the very responsible actions by advertisers and media outlets in all sectors, as out of respect they ceased virtually all activities for over a month, has had an impact on the results for 2001. The industry fundamentals — growing installed base of Internet users, more attractive demographics, and higher accountability – are firmly entrenched, enabling it to more than hold its own through its first acid test of a slow ad market. What is important now is how we improve the medium and the actions we take to help the industry rebound.
“No one should mistake the fact that the Internet, and in fact, all interactive platforms, hold a key to sustained economic growth, and the IAB’s and its member companies’ actions in simplifying the process making the medium easier for all participants to navigate, are having very positive effects. A very real indication of the vitality of the business for online ad sellers was recently reported by Thomas Weisel Partners in their weekly report which, based on extensive studies of SEC filings, company documents and other research, concludes that 95% of the top online ad sellers are expected to be EBITDA positive in 2003. The Weisel survey has 42% of these online ad sellers profitable in 2001, and estimates that the number will grow to 71% in 2002 and 90% in 2003,” Stuart concluded.
Internet Profitability Survey
Summary based on CY EBITDA
| 2001 | 2002E | 2003E | |
| No. Of Profitable Companies | 10 | 15 | 19 |
| No. of Companies with Data | 24 | 21 | 21 |
| % Cos. with Profitable Data | 42% | 71% | 90% |
| Total Companies Surveyed | 24 | 24 | 24 |
Source: Thomas Weisel Partners
The larger traditional advertisers have begun to recognize the value that Internet advertising brings to their overall marketing efforts, and that by integrating their offline efforts with online exposure, the combined effect offers them strong growth potential. This was amply demonstrated by the results of the Unilever/MSN Media Mix research released in February of this year, in which the research suggested that increased online advertising may result in increased key metrics such as brand awareness, brand attributes and purchase intent and branding effectiveness. The IAB will launch a second phase to this groundbreaking research later this year. Details of the research can be found at http://advantage.msn.com/.
“Unlike other ad-supported media platforms, the Internet advertising industry has the ability to learn quickly from its research and foster positive change for the benefit of advertiser growth and spending,” said Tom Hyland, Chair, PricewaterhouseCoopers New Media Group. “The revenue we have seen for this quarter and the full year, compare favorably with the results we have seen reported from other sectors, and we believe that this is attributable to online ad sellers’ ability to address advertiser needs in a timely fashion
In 2001, the consumer-targeted category continued to be the largest overall segment for online advertising (30%) with the retail segment (50%) driving these ad revenues.
| 2000 | 2001 | |
| Consumer | 31% | 30% |
| Computing | 18% | 18% |
| Financial Services | 14% | 12% |
| Media | 8% | 12% |
| Business Services | 9% | 9% |
The Big Continue To Lead.
Not surprisingly, industry concentration continues, with revenues increasingly being consolidated within large media companies, similar to most other media sectors..
| 2000 | 2001 | |
| Top 10 Media Companies | 70% | 76% |
| Top 25 Media Companies | 83% | 89% |
| Top 50 Media Companies | 93% | 96% |
CPM is the Dominant Pricing Model.
The CPM pricing model is the model of choice, comprising 45 percent of all deal revenues in the fourth quarter of 2001, while straight performance contracts were at 13 percent, and hybrid deals, a combination of CPM and performance totaled 42 percent.
Ad Formats
Percentage use of various ad formats remained fairly consistent in 2001. Formats tracked and their respective share of 2000 and 2001 full year revenue are:
| 2000 | 2001 | |
| Banners | 48% | 36% |
| Sponsorships | 28% | 26% |
| Classifieds | 7% | 16% |
| Slotting Fees | N/A | 8% |
| Interstitials/Superstitials® | 4% | 3% |
| 3% | 3% | |
| Rich Media | 2% | 2% |
| Referrals | 4% | 2% |
| Other | 3% | 0% |
The top three ad formats — banners, sponsorships and classifieds — still account for the lion’s share of industry revenue. The slight decline in classifieds partly reflects continued weakness in the job market, and was partially offset by growth in auction-based listings,”said Peter Petrusky, Director, PricewaterhouseCoopers New Media Group.
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 industry’s leading interactive advertising association and represents companies responsible for selling over 75% of online advertising in the United States, including; AOL, CNET, DoubleClick, MSN, Walt Disney Internet Group, Yahoo, and many 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.
Contact:
Marla Nitke IAB
