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Growth In Online Advertising Revenue Slows

From the fourth quarter of 2007 to the first quarter of 2008, the industry saw its first quarter-to-quarter revenue drop since the second quarter of 2004, an IAB report shows.

Revenue growth from online advertising is slowing, as the economic downturn takes its toll, industry figures released Thursday showed.

Signs of a slowdown are in this year's quarter-to-quarter comparisons from the Interactive Advertising Bureau. From the fourth quarter of 2007 to the first quarter of 2008, the industry saw its first quarter-to-quarter revenue drop since the second quarter of 2004. Starting in the first quarter of this year, revenue has remained relatively flat. From the first to second quarters, online advertising sales were nearly the same. Revenue rose 2% from the second to third quarters.

"The growth of interactive advertising that we've been experiencing over the past few years has stabilized due in large part to the difficult current economic climate," Randall Rothenberg, president and chief executive of the IAB, said in a statement.

David Silverman, a partner at PricewaterhouseCoopers, which compiles the data used in the quarterly revenue report, said that "a weakening economy will continue to be a challenge to all forms of advertising-supported media."

Nevertheless, the consulting firm believes Internet ad publishers will do better than other media because of their ability to offer measurable, performance-based advertising to advertisers. "The Internet should be better poised to withstand the storm given its ability to combine performance-based advertising along with broad-based branding."

Indeed, on a year-to-year basis, the industry appears strong. Revenue in the third quarter rose 11% from the same period a year ago to nearly $5.9 billion, according to the IAB. For the first nine months of 2008, revenue totaled $17.3 billion, up 14% from $15.2 billion in the same period last year.

Online advertising includes display advertising, such as banner ads, video ads, and rich media (i.e., Adobe Flash) ads; and text-based search advertising, which is dominated by Google.

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