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Internet Advertising Revenues Grow in ‘07: Performance Deals Outpace CPM Deals!
The Interactive Advertising Bureau has released internet advertising stats from the first half of 2007, and the keyword is strong growth (up nearly 27% from 2006) and the triumph of the performance model over CPM:
The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) today released the IAB Internet Advertising Revenue Report covering the second quarter and the first six months of 2007. Internet advertising revenues (U.S.) for the first six months of 2007 were nearly $10 billion, setting yet another new record and representing a nearly 27 percent increase over the first half of 2006. Internet advertising revenue totaled nearly $5.1 billion for the second quarter of 2007, exceeding the $5 billion mark for the first time in a quarter, a 25.4 percent increase over the same period in 2006.
Records aside, the IAB report also breaks down which segments of the internet advertising industry are contributing to that $10 billion figure with comparisons to 2006. Search jumps up a point from ‘06 to 41% and lead gen continues to gain traction, moving from 7% in 2006 to 8% in ‘07. Rich media (including video) rose two percentage points to 8% with the biggest gain. Classifieds and sponsorships models were lower in their ‘07 percentages as compared to ‘06.
Perhaps most interesting to my performance marketing minded eye is that “CPM Deals” were replaced by “Performance Deals” as the leading pricing model for internet advertising. In 2006, CPM deals comprised 48% of the overall total while performance deals (CPA, CPC, etc) were at 46%. However, in ‘07, performance deals make up 50% of deals while CPM fell to 45%. That is a very important shift in marketing trends which I haven’t heard very many people discussing because it is troubling to the old guard digital agencies who have so much invested in the CPM model.
As we enter Q4 and move into ‘08, I expect for performance deals to continue to widen the gap over CPM deals. What that means for the internet advertising market in general is more transparency, better metrics and ever increasing investments in the space as advertisers and merchants are able to better track their ad spends.
Great find and analysis, Sam. Key here is the definition of “performance.”
Google is literally driving the process of defining “performance” and at a relentless pace. Their recent announcement couldn’t be more significant: They’re allowing advertisers the means to optimize their CPC ads against advertiser-defined customer/order acquisition goals.
Hello, CJ/Valueclick! Hello, DoubleclickPerformics! Hello, Linkshare and hello Yahoo! et al!
Google’s ability to control this entire conversation and create this entire market is un-matched. They are rapidly adapting to a coming shift — away from ‘traditional CPC’ toward CPA — and there stands to be serious roadkill when all is said and done.
I must quote DigitalMoses’ editor.
“Google has threatened to do this for some time, beginning in June of 2006 when they announced their first CPA venture, the content referral network, which they followed up with Pay per action beta in March of this year with the official launch taking place towards the end of July. With their usual genius, Google leveraged their expansive publisher network to gain the necessary insight into performance – leveraging their long tail of often underwhelming publisher placements – as well as building up an increasing stable of advertisers….
Having all those pieces in place – CPA advertisers, the publisher placements and acceptance, Google could then connect the two and offer advertisers a true CPA product. And, that’s just what they did on the 24th of September.”
I’ll throw in Umair Haque for good measure.
“That’s Google’s strategy-it’s about edge leverage creating enormous amounts of space for new strategic moves in a industry bereft of any kind of strategic imagination.”
Where’s the strategic imagination within the CPA “affiliate marketing” industry? Buller? Buller?