Online ad market bounces back into growth territory in 2010

U.S. companies and organizations spent 15% more in online advertising in 2010 than in 2009, driving revenue for advertising providers like Google, Yahoo and Facebook to a total of $26 billion, setting a record, according to a study.

With these results, the U.S. online ad market rebounds into a growth pattern after shrinking 3.4% in 2009 to $22.7 billion, according to a report commissioned by the Interactive Advertising Bureau and conducted by PricewaterhouseCoopers (PwC).

As it has since 2006, search was the most popular online ad format, nabbing 46% of all spending, but it grew 12%, 3 percentage points below the overall growth rate. Also, search's slice of the spending pie shrunk 1 percentage point from 2009.

Display advertising, such as video ads, banners and sponsorships, was the second most popular format with a 38% share of spending, but it grew much faster than search at 24%. Display advertising's share of spending grew from 35% in 2009.

Rounding out the main five formats were classifieds (10%), lead generation (5%) and e-mail marketing (1%), according to the IAB and PwC.

The market growth is being driven by the increased time that people spend online on social media sites like Facebook, and watching full-length movies and TV shows on sites such as Netflix and Hulu.

The IAB and PwC, which have been reporting quarterly and annually on online ad spending in the U.S. since 1996, for the first time released estimates for mobile ad revenue, which they pegged at between $550 million and $650 million in 2010.

Spending in the fourth quarter grew 19% to $7.45 billion year-on-year, also a record and the fifth consecutive growth quarter since the economy cratered in late 2008 and 2009.

Retailers as a group were the biggest spenders in online ads, generating 21% of all spending, followed by telecommunications companies (13%) and financial services firms (12%).

Copyright © 2011 IDG Communications, Inc.

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