Web Watch

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Online ad sales have become a fairly good barometer of how the Internet is doing as an industry. In the early days of the Web, it was considered acceptable, if not necessary, to build an Internet-based business with the anticipation that advertising and sponsorships would eventually follow the eyeballs onto your Web site. The basic problem  was there were many more Web sites than advertising dollars to support them, and it took only a few years for the bubble to burst.

Things have changed quite a bit in the past 10 years. The Interactive Advertising Bureau reports that online ad spending reached $12.5 billion in 2005, a 30% increase over 2004 levels. The research and consulting firm, Parks Associates, projects this number will hit $23.5 billion by 2010. The Internet, as an industry, is now doing quite well.

Companies like Ford, General Motors and Absolut Vodka plan to spend 20% of their total advertising budgets online this year. Market research firm eMarketer estimates that $15.6 billion will be spent on online advertising in the US this year. While ad budgets in general are up only 4% on average in 2006, marketers are putting money previously allocated to newspapers, magazines and television in the Internet.

The money is finally following the eyeballs.

If you were to look at how these Internet advertising dollars are spent, you would find that keyword search advertising represents 41% of the market, and display advertising totals 34%. About 46% of the display advertising deals are based on cost-per-thousand impressions, and 41% of Internet advertising deals are still based on cost-per-click or cost-per-transaction.

It can be argued that Web advertising still isn't getting the share of advertising it deserves. However, with better targeting, lower costs and a much better feel for advertising ROI, the future looks bright.

Dan McKillen is president of the HealthDay News Service

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