Ad revenues suffer from spending cuts

U.S. Internet advertising dropped by 7.8 percent in the first half of 2001 from the same period a year earlier, according to a study released Monday.

Web advertising sales hit $3.76 billion for the first and second quarters of 2001, with first-quarter revenues equaling $1.89 billion and second-quarter revenues totaling $1.87 billion, according to an "Internet Ad Revenue Report" from the Interactive Advertising Bureau (IAB). The New Media Group of PricewaterhouseCoopers conducts the research independently for the advertising trade group.

In 2000, U.S. Internet advertising grew by 78 percent from 1999, reaching $8.2 billion. After several years of double- and triple-digit growth, U.S. online ad sales have begun to drop off.

The downfall in ad revenue in 2001 reflects deepening woes in the tech sector and an overall slowing of the economy. Countless Net-related companies have been hobbled by softness in the ad market, causing many to close or reinvent their businesses to diversify revenues from advertising.

IAB Chief Executive Robin Webster said that although the decline is significant, it is less than shortfalls in comparable traditional media, including spot TV and radio. Such markets are purchased on similarly short advertising cycles, unlike network or syndicated TV advertising, which is bought up front.

In the past six months, spot TV advertising dropped 14.7 percent, and national spot radio advertising dropped 22.4 percent, according to marketing research firm Competitive Media Reporting. Sunday newspapers declined by 10.4 percent.

"While the declines (for Internet advertising) are not insignificant, they are well within the parameters of the overall advertising industry's experience, and seen in perspective, they reflect our confidence in the long-term value of the online medium," Webster said in a statement.