ClickZ reports that research by the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers reveals a decline in the growth rate of online advertising expenditure.

In the first half of 2008, $11.5 billion was spent on online ads. While this constitutes an increase of over 15 percent over the same period in 2007, it’s much lower than the 37 percent increase in the first half of 2006 compared with 2005.

Also, while online ad spending in the second quarter of 2008 was 13 percent the second quarter of 2007, it was 0.3 percent lower than what it was in the first quarter of this year. In other words, online ad growth looks to be dipping.

Nevertheless, online spending was still significant in the first half of the year. Search engine ad spending (about 44 percent of all online ad spending) grew to $5.1 billion, up 24 percent over the initial half of 2007, while display spending (33 percent of all online ad spending) rose by 19 percent to $3.8 billion in the first half of this year.

Most display spending was devoted to banner ads (21 percent). The remainder was devoted to rich media (7 percent), video (3 percent) and sponsorships (2 percent). Meanwhile, spending on online classifieds decreased from 17 percent to 14 percent in the first half of the year and lead generation ad spending dropped from 8 percent to 7 percent of budgets. Email remained steady at 2 percent of online ad spending.

Finally, advertisers continue to embrace performance-based ad models. Performance-based ads, such as cost-per-click or cost-per-acquisition ads were up for 52 percent of ad spending in the first six months of this year, up from 50 percent in the first half of 2007. Meanwhile, CPM-based ad spending dropped slightly from 45 percent to 44 percent.

Source: Kate Kaye, “Online Ad Growth Declines in First Half 2008″, The ClickZ Network, October 7, 2008

Speaking about the future of online video at the Interactive Advertising Bureau’s recent MIXX conference, eMarketer CEO Geoff Ramsey said that in the short- to- mid-term, television and online video models will merge, both in terms of content and ads.

Mr Ramsay believes that while television will become more measurable - and accountable - the quality of online video content will improve to rival TV. Meanwhile, Ramsay sees the on-demand video model to be particularly promising. He also sees the format - where viewers can watch whatever they want at any time - will continue to be largely ad-supported.

While the online video medium will remain small in terms of total ad dollars — especially compared with the $70 billion U.S. television market — eMarketer expects it to grow to exceed $3 billion by 2012 in the U.S.

Source: eMarketer, “Where Is Online Video Headed?”, eMarketer, October 3, 2008

Working on behalf of the Interactive Advertising Bureau (IAB), Bain and Company recently polled seven major web publishers and found that all of them listed higher prices for online video ads than for display (banner) ads.

On average, the video CPM was around $43 - about three times higher than the $15 average CPM for display ads.

Source: eMarketer, “Video Advertising CPMs”, eMarketer, September 19, 2008

Adgregate Markets has released a service called ShopAds which allows companies to process secure credit card purchases within display ads.

Using the ShopAds technology, someone who views a ShopAds supported banner ad on a given publisher’s website can potentially order a product or service within that ad… without being redirected off the publisher’s website.

Like other widgets, ShopAds can be shared on social network profiles and other pages. However, what’s truly innovative is the ability for them to appear within any Interactive Advertising Bureau (IAB) standard display ad unit.

ShopAds are Flash-based and, unlike JavaScript based transactional ad units, don’t rely on a secure host site to ensure secure transactions. Rather, the secure, encrypted shopping carts inside ShopAds are portable into any HTML environment, including social network pages and blogs.

When a sale is complete, the ShopAds system confirms the transaction with a “thank you” and sends the buyer a tracking number via email. Buyers may continue shopping or return to the original widget screen, which can host large catalogs with potentially millions of products.

I think ShopAds has huge potential for advertisers/merchants and publishers/affiliates. Not to mention customers, since it overcomes the “inconvenience barrier” of having to click away from a website in order to inspect, or indeed buy, a product.

Source: Fred Aun “Allowing Web Users to Transact Through Ads”, The ClickZ Network, September 9, 2008

A new benchmarking study by the Interactive Advertising Bureau (IAB) and consulting firm Bain & Company, indicates that publishers may be underselling their ad inventory as they increasingly rely on ad networks to sell ad impressions.

The IAB sponsored “Digital Pricing Benchmarking Study,” released yesterday, found that publishers sold 30 percent of their ad impressions via ad networks in 2007, up from just 5 percent of all ad impressions in 2006. But while ad networks may be pleased with this massive 600 percent increase in usage of their services, a “quick fix” approach by publishers to dump excess ad inventory onto ad networks may actually be hurting both groups.

Publishers typically see their ad rates cut by up to 90 percent when they sell though ad networks. But this isn’t inevitable. According to the IAB and Bain & Company, if publishers and ad networks developed better working relationships, they could together bring about higher CPMs and greater ad revenues for all.

Publishers and ad networks both achieved increased ad revenues in 2007 – an increase of 30 percent per annum for publishers and an increase of 50 percent per annum for ad networks. But with tougher economic times constraining ad budgets in 2008, such growth levels are far from guaranteed going forward. By working more closely together to manage inventory and ad sales, publishers and ad networks are better able to maintain their revenue growth momentum.

Source: Douglas Quenqua, “Study: Publishers Slashing Prices to Dump Excess Inventory”, The ClickZ Network, Aug 12, 2008