Online Ad Market Sees Glimmer of Hope Following a Gruesome 2009

online advertising market hopes
online advertising market hopes

The online advertising business may be turning the corner. After a dismal start to 2009, Internet advertising spending perked up in the fourth quarter. Revenue hit an all-time quarterly high of $6.3 billion -- a 2.3% increase over the previous year's quarter, according to the latest IAB Interactive Advertising Revenue Report.

Unfortunately, one strong quarter could not offset the rest of the year, which saw online ad spending fall off a cliff. Overall, 2009 Internet advertising revenue in the U.S. came in at $22.7 billion, a 3.4% drop from 2008, the Interactive Advertising Bureau and PricewaterhouseCoopers announced. The results marked the first annual decrease since 2002, when the country was last battling its way out of a recession.

Good News in the Bad News

The annual results may sound like bad news for an industry used to double-digit increases every year, but some industry experts see the results as something worth celebrating.

"The record $6.3 billion spent on Internet advertising in the fourth quarter of 2009, while certainly aided by seasonal demand, is a strong indication that the worst of the economic impact on Internet advertising is over and that the seeds of growth have been planted," David Silverman, a partner at PricewaterhouseCoopers said in a statement.

Search advertising accounted for the largest percentage (47%) of overall Internet ad spending in 2009. In order to show up in search results on Google (GOOG) or Bing, advertisers spent close to $11 billion.

The real growth story of last year, however, was in digital video -- think television commercials that air online. Marketers spent 39% more on these ads than they did in 2008. While still only comprising slightly more than $1 billion, or 4% of total online ad spending, digital video continues to be an area for growth. "Consumers don't seem to mind [digital video commercials]. It reminds them of TV," said Terence Kawaja a managing director of investment banking advisory firm GCA Savvian Advisors.

Classifieds and email advertising lost ground last year, with spending on classifieds falling from $3.2 billion in 2008 to $2.3 billion in 2009. Spending on email ads dropped from $405 million in 2008 to $292 million in 2009.