2006 Online advertising revenues threaten to exceed the $20 billion level

IAB Internet Advertising

Revenue Report

An Industry Survey Conducted by PricewaterhouseCoopers

and Sponsored by the Interactive Advertising Bureau (IAB)

2006 Second-Quarter and First Six-Month Results

September 2006

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About the IAB Internet Advertising Revenue Report

Conducted by the New Media Group of PricewaterhouseCoopers LLP on an ongoing basis, with results

released quarterly, the “Internet Advertising Revenue Report” was initiated by the Interactive Advertising

Bureau (IAB) in 1996. This report aggregates data and information reported directly to

PricewaterhouseCoopers LLP by companies representing thousands of Web sites, in addition to other

online ad selling companies.

The results reported are considered the most accurate measurement of Internet/online advertising

revenues since the data is compiled directly from information supplied by companies selling advertising

online. All-inclusive, the report includes data reflecting online advertising revenues from Web sites,

commercial online services, e-mail providers, as well as other companies selling online advertising.

The report is conducted independently by PricewaterhouseCoopers LLP on behalf of the IAB. PwC does

not audit the information and provides no opinion or other form of assurance with respect to the

information. Only aggregate results are published and individual company information is held in strict

confidence with PricewaterhouseCoopers LLP. Further details regarding scope and methodology are

provided in the appendix to this report.

$4.06 billion in the second quarter of 2006, marking the seventh quarterly revenue increase since

the fourth quarter of 2003. Total revenues for the 2006 second quarter increased 5.5 percent from

the 2006 first-quarter total of $3.85 billion, and 36 percent from the 2005 second-quarter total of

$2.99 billion. Year-to-date Internet advertising revenues through June 2006 totaled $7.9 billion, up

nearly 37 percent versus the same six-month period in 2005.

"Interactive delivers an arsenal of options for advertisers no matter their marketing and business

objectives. From search, broadband, lead generation, behavioral targeting, consumer generated

content and new emerging platforms like mobile and iPTV, Interactive continues to solidify its

position as a mainstream medium. This latest report is a clear indication that Interactive is of

increased importance to marketers today to engage their consumers and drive sales."

– Greg Stuart, President and CEO, IAB

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largest category of revenues at 49 percent of 2006 second-quarter revenues, down from 51

percent from the same period in 2005. Financial Services, the second-largest category, accounted

for 16 percent, followed by Computing advertisers at 10 percent. Within the Consumer category

the biggest sub-categories are Retail (47 percent of 2006 second-quarter consumer revenue

category), Automotive (21 percent), Leisure (14 percent) and Entertainment (8 percent).

"The latest results reaffirm the Internet's growing importance for marketers to integrate online

advertising into their overall media plans. While search advertising remains the largest format in

terms of revenues, we expect to see new formats like video ads to continue to emerge as

advertisers seek to leverage the branding opportunities afforded by the growing installed base of

broadband users."

– David Silverman, Partner, PricewaterhouseCoopers LLP

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accounted for 40 percent of 2006 second-quarter revenues, consistent with the same period in

2005. Display advertising, Classifieds, and Referrals all increased compared to last year

accounting for 21 percent, 20 percent, and 7 percent of 2006 second-quarter revenues

respectively.

"Internet advertising continues to reach new milestones, exceeding $4 billion in quarterly revenues

for the first time, and on pace for another record year of revenues. With the seventh consecutive

quarter of growth behind us we are confident that the Internet will continue to reconcile the

imbalances between its share of media consumption versus its relative share of total advertising

spend."

Executive Summary

IAB Internet Advertising Revenue Report

2006 Second-Quarter and First Six-Month Highlights

Internet advertising revenues (“revenues”) in the United States totaled $7.9 billion for the first six months

of 2006, with Q1 accounting for $3.85 billion and Q2 totaling $4.06 billion. Internet advertising revenues

for the first six months of 2006 increased nearly 37 percent from the same period in 2005.

Key trends underlying 2006 year-to-date results:

Detailed Findings

Revenues Totaled $4.1 Billion in the Second Quarter of 2006

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peripheral equipment), prepackaged software (operating, utility and applications programs), local area

network systems and network systems integration, computer processing and data preparation, and data

processing services.

consumer finance companies, loan companies, business credit institutions, and credit card agencies.

Also includes companies engaged in the underwriting, purchase, sale or brokerage of securities and

other financial contracts.

data communications, two-way mobile/cellular communications services, and other non-vocal message

communications services (e.g., cablegram, electronic mail and facsimile).

station) including commercial, religious, educational, and other radio or television stations. Includes

multi-channel video providers on a subscription fee basis (e.g., cable television, wireless cable

television, and direct broadcast satellite services). Also includes establishments primarily engaged in

publishing newspapers, periodicals and books.