Growth in US Online Advertising Slows Down Further in Q3

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The growth slowdown affecting U.S. online ad spending this year continued in the third quarter, bad news for the many Internet companies in this market, like Google, Yahoo, MySpace and Facebook.

Online ad revenue hit almost US$5.9 billion in the third quarter, up 11 percent over the same quarter last year, according to a report from the Interactive Advertising Bureau and PricewaterhouseCoopers.

However, the growth rate in 2007's third quarter was slightly more than 25 percent, compared with the same quarter in 2006.

That trend of growth deceleration is consistent with a recent IAB/PwC report about 2008's first half, when spending grew 15.2 percent, compared with growth of 27 percent in the first half of 2007.

In the first half of 2006, online ad spending grew even faster, at a 37 percent clip over the same period in 2005.

The widespread economic woes are to blame for the slowdown in growth, but, compared to other forms of advertising, the online medium is in a better position to weather the storm, the IAB and PwC said Thursday. The reason: online advertising offers marketers more precise ways to measure its effectiveness.

Still, the robust growth in online advertising in the past five years has fueled the Web 2.0 boom in innovation, which could be threatened by the slowdown, coupled with a parallel decrease in venture capital funding.

Web 2.0 technology revolutionized the consumer Internet market and is now shaking up workplaces with community-focused, Web-hosted applications for video and photo sharing, online music streaming, blogging, wikis, syndicated feeds and social networks, as well as hosted IT services, like storage and computing capacity.

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