Online Ad Spending Had Healthy Growth in 2006

Online ad spending in the U.S. grew 34 percent in 2006, compared with 2005, as marketers continued expanding their use of the Internet to promote their products and services, according to a new study.

With an estimated US$16.8 billion spent, the U.S. is a "healthy environment" for online advertising, the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) said Wednesday.

Convinced that Internet advertising's effectiveness continues to improve, U.S. companies are steadily increasing their online marketing budgets, the organizations said. Ad spending grew an estimated 32 percent in the fourth quarter to $4.8 billion, the highest quarterly total ever.

With another year of solid growth, the U.S. online advertising market distances itself more from the difficult years that followed the dot-com bust, when spending money for online marketing was somewhat discredited.

After peaking at $8.2 billion in 2000, U.S. online ad spending fell in 2001 and 2002, but began regaining lost ground in 2003, as the once disgraced Internet industry showed its first signs of recovery and the start of the Web 2.0 era.

In 2004, with the emergence of Google Inc. as a search engine and advertising powerhouse, online marketing increased its momentum. That year the market finally broke the 2000 record, ending with $9.6 billion in online ad spending, and Google's IPO (initial public offering) became further proof of the Internet industry's rebound.

By growing every year since 2003, online ad spending has played a major part in fueling a new wave of technical innovation and venture capital investment in the Internet market. A particularly vibrant segment has been search engine pay-per-click ads, the format which generates most of Google's rising revenue.

IAB and PwC reached their estimates from data they collected from the top 15 online ad sellers in the U.S. The organizations will report actual results for the third and fourth quarters of 2006 next month.