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Two Distinct Internet Advertising Segments

Kagan Research's quarterly analysis of advertising indicates Internet-based advertising vehicles have split into two categories -- the high-growth "haves" and the sudden emergence of "have nots."

Broad-based portals Yahoo! and MSN posted weak ad revenue growth in the second quarter, of 26.7 percent and a meager 0.1 percent respectively. Meanwhile, Google ad revenue soared 77.4 percent. Barry Diller-led IAC/InterActiveCorp generated an astronomical 1,042 percent increase. But its acquisition of search engine just after the year ago quarter skews the comparison.

The average growth rate is based on $5.07 billion in ad revenue from eight companies tracked during the three months ended June 30, in the Kagan Research/JupiterKagan online report "Old vs. New Media: The Tortoise and Hare," with the comparison to the same quarter a year ago.

The divergence into two distinct segments separated by growth rates shows a degree of maturing for Internet advertising and underscores a profit warning issued by Yahoo! that it is experiencing an advertising slowdown. "Yahoo! is clearly showing the signs of age," says Kagan Research associate analyst Erik Brannon. "While it emerged as a massive web portal, it seems pretty much topped out in its current configuration."

Although the eight-company Internet category averaged 51 percent ad growth in Q2 2006, Kagan Research expects total Internet advertising will climb 22 percent for the wider full-year survey period. Note, the Q2 data for the eight giants includes worldwide revenues, not just U.S.

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