Industry related news item:
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Media Daily
Covering the Media Spectrum
January 28, 1998
Vol. 6 - No. 18
Media Daily Archive
DIRECT Newsline
Letters to the Editor
Web Ad Revenue Totals $597.1 Million, Up 152.6%
for Year
(Simba/Electronic Advertising & Marketplace Report) Web advertising revenue reached $597.1
million in 1997, up 152.6% from $236.4 million in 1996, according to EAMR estimates.
Quarter-to-quarter growth over the past year ranged from 23.6% to 58.7% with $84 million in the
first quarter, $133.3 million in the second quarter, $169.8 million in the third quarter, and $210
million in the fourth quarter.
Several factors drove growth, including rising ad budgets for existing Web advertisers, the
emergence of new online advertisers, the rise of networks giving exposure to both advertisers and
Web sites, as well as a growing Web audience that is beginning to more closely resemble
mainstream media demographics.
Despite that enormous growth, however, Web advertising is still far from a powerhouse medium. A
handful of sites continue to dominate the media; according to EAMR estimates, 18 top ad-supported
sites accounted for 55% of the market in 1997, at $328.3 million. And, despite publishers' claims to
the contrary, the industry is still heavily influenced by barter and advertising swaps rather than
advertisers paying for all ads.
Yahoo! was the top ad-supported site for the second year in a row at $53.2 million, up 180% from
$19 million in 1996, according to EAMR estimates. Second-ranking Excite narrowed the gap with
Yahoo, largely as a result of its acquisition of WebCrawler from America Online last year. Excite
generated $40.2 million in ad revenue last year, up 171.6% from $14.8 million in 1996. Infoseek
was plagued by management upheaval in 1997, yet managed to be the third-largest ad-supported
site in 1997 at $28.2 million, up 93.5% from $14.6 million in 1996.
Despite the call from many advertisers for more targeted marketing, the search engines remain
almost a default buy among Web advertisers simply because they consistently offer the largest
audience at one location on the Web. Advertisers may be even more sold on the search engines as
they begin to model themselves after America Online and add more commerce and community
features to their sites, which will cause viewers to spend more time at the search engine rather than
jumping off to a new location.
Of the 18 top sites surveyed monthly by EAMR, CNN had the largest increase in ad revenue, up
314.9% to $14.6 million, from $3.5 million in 1996. Pathfinder had the flattest growth among the top
sites, yet still enjoyed a 60% boost to $10 million in ad revenue. Other sites began to report their
first profits from Web advertising. Yahoo reported a profit for much of 1997 (although that was due
in large part to the fact that Yahoo shareholder Softbank was one of the largest advertisers on the
site), ZDNet claimed its first profit in fourth quarter 1997, and Wired Digital expects profits in 1998.
Site consolidation was one of the more dominant trends in 1997, particularly among the technology
publishers such as Wired, CMP and Mecklermedia. Advertisers were able to buy across a single
network, while publishers were able to market their Web brand more clearly.
Clickthrough emerged as the dominant standard for judging online advertising effectiveness in 1997,
but by the end of the year, industry players were debating whether direct marketing or branding is
the best application for the Web, fueled in large part by the Internet Advertising Bureau's (IAB's)
study on Web banner effectiveness. With industry average clickthroughs flat at 2% to 4% in 1997
and 1996, publishers were overjoyed when the IAB announced that viewers don't have to click on
the ad to have their marketing message ingrained. Web advertisers, however, remain unconvinced.
Pay-per-performance pricing programs created a stir in the industry, but haven't swept through the
market as some publishers feared and some advertisers hoped. DoubleClick Direct and PointCast
Direct were the first pay-per-performance packages offered by A-level interactive services, although
both companies only offer unsold or limited sections of inventory, and both work with each
advertiser on their creative to ensure positive results. As online commerce and advertising become
more intertwined, programs such as LinkShare's Referral, Track & Payment service, which tracks
ad banners that result in sales, will become more common.
Advertising revenue, while growing as an individual revenue stream, is declining as the percent of
overall revenue. For example, Lycos reported that advertising accounted for 69% of total revenue
for the three month fiscal period ended Oct. 31, 1997, down from 85% for the same period in
1996. Publishers may see money from subscription and commerce partnerships rival or even eclipse
advertising as a revenue stream, as sites look to diversify their revenue streams.
The IAB evolved into an effective forum for voicing industry concerns over the past year, and even
had success with implementing banner size standards among the industry's top sites. However, it will
be interesting to see if the IAB can remain effective in getting the industry to adopt certain
procedures, or if the organization's primary role will be as a meeting house for industry players to
network and voice concerns.
The industry has identified measurement and tracking standards as a pressing issue for 1998, and the
IAB will attempt to develop standards through its standards & practices committee. The association
also will broaden its role as industry cheerleader with the IAB Road Show, in which it will attempt to
convert 25 of the top media advertisers not on the Web.
Web publishers are still overly dependent on a few key high-spending advertisers. The number of
advertisers spending more than a few hundred-thousand dollars online is very small, and the
effectiveness of the online marketing message on the viewer remains unproven. Local Web
advertising and foreign markets have all been labeled as "the next big thing," but so far haven't
justified those claims with real dollars, according to industry sources. There is little doubt that Web
marketing will be big, but the rate of growth may be slower than many Web-based companies are
hoping for.
Comment
Media Daily Archive
DIRECT Newsline
Letters to the Editor
Cowles/Simba Media Daily 01/28/98
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