Technology | Media | Telecommunications

Saturday, February 23, 2008

Online Media Continue Advertising Windfall

Advertising revenue continues to follow consumers online. As more and more people spend time on the Internet, companies are redistributing advertising dollars from traditional media to online media to follow this key trend.

In its quarterly wrap-up report, IDC says total U.S. Internet ad spending in the fourth quarter of 2007 (4Q07) grew nearly 28 percent over the same quarter in 2006 to $7.3 billion. For the full year 2007, online ad revenue grew 27 percent year over year to $25.5 billion.

IDC research also found that Google's net U.S. market share declined for the first time in two years due to slower growth in domestic fourth quarter sales. The market leader's net U.S. Internet advertising market share was down 0.5 percentage points to 23.7 percent last quarter compared to 3Q07.

Google's estimated net U.S. Internet advertising sales (excluding the traffic acquisition costs they pay out to the partners in their networks) grew by a little more than 40 percent in 4Q07, but its year-on-year growth rate in the quarter before had been 50 percent.

"If a merger between Microsoft's new media business and Yahoo! would come to pass, the combined entity would have a net U.S. advertising market share of about 17 percent based on our 4Q07 data," says Karsten Weide, program director for IDC's Digital Marketplace: Media and Entertainment service.

"It would not quite bring Microsoft-Yahoo! to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone."

IDC's report analyzes the net U.S. advertising sales of the most important new media companies. Their market study is based on a model that is populated with data from companies quarterly and annual reports, earnings calls, interviews with company representatives, and news coverage.

To calculate the net U.S. Internet advertising sales market shares, the model looks at the quarterly Internet advertising revenues of the top 15 U.S. new media operations, including AOL, CNET, DoubleClick, Facebook, Fox Interactive Media, Google, IAC, Microsoft OSB unit, and Yahoo!