Internet advertising revenue continues double digit growth, as a share of the approximately $256 billion spent on advertising budgets annually in the United States, is still a minor percentage of the whole. Revenue from online ads for the first six months of the year was approximately $5.8 billion, a new record and a 26 percent increase over the same period in 2004, according to a report issued Monday by PricewaterhouseCoopers and the Interactive Advertising Bureau, a trade association with about 200 members selling Internet advertising.

"The consistent growth in overall revenues shows marketers may be shifting more of their total advertising budgets to online. This is a natural development as research shows more consumers are spending a larger percentage of their media time online, while the flow of advertising dollars follows," one analyst was quoted as saying by The Associated Press.

Still, the increasing importance of the online space for marketing managers, in many industries, cannot be denied. The chief marketing director of Pepsi-Cola North America, commented that Pepsi will spend at least 5 to 10 percent of its marketing budget online in 2005. Ford Motor Co. will spend 15 percent, conservatively, of its ad budget for the Fusion mid-size sedan, which will be introduced in November, for online ads, commented a Ford spokesman.

The online advertising spending goes mostly to paid search listings, for which advertisers buy displays adjacent to search terms. For the first half of the year, according to the report, these represented 40 percent, or $2.3 billion, of the total revenue. Ad spending for searches in the same period of 2004 was also 40 percent of the total, about $1.8 billion.

Advertisers spent a record $5.8 billion touting their wares online during the first six months of 2005, a 26% increase over the first half of 2004, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. PricewaterhouseCoopers partner David Silverman says the firms' research shows advertising dollars are following consumers to the Internet. "Marketers may be shifting more of their total advertising budgets to online," he said in a statement.

The mix in types of ad spending in the first half of the year remained virtually unchanged from a year earlier, with 40% of ad dollars spent on search, 20% on display ads, 18% on classifieds and 8% on rich media. Year-over-year spending in those categories soared to $2.3 billion (27% increase) for search, $1.2 billion (23%) for display ads, $1 billion (33%) for classifieds, and $463 million (26%) for rich media. Referrals and lead generations represented 6% of ad spending, increasing to $347 million, tripling in a year.

This came as no surprise, because Google said in July that its second-quarter revenue nearly doubled to $1.38 billion from $700 million for the same period in 2004. For the second quarter, Internet advertising total revenue approached $3 billion, a 26% increase over the same period in 2004. Second-quarter revenue represents a 7% increase over first-quarter spending. Research firm eMarketer predicts that more than $12 billion will be spent this year, double 2004 levels. By 2009, that's expected to reach $22 billion.

Meanwhile, there's evidence that like online advertising, e-commerce is poised for a strong run heading into the all-important fourth quarter.

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