U.S. Internet Advertising Grew by 27% to $25.5 Billion in 2007, According to IDC

FRAMINGHAM, MA .- As consumers spend more time on the Internet, companies are redistributing advertising dollars from traditional media to online media to follow this trend. In its quarterly wrap-up report, IDC says total U.S. Internet ad spending in the fourth quarter of 2007 (4Q07) grew nearly 28% over the same quarter in 2006 to $7.3 billion. For the full year 2007, online ad revenue grew 27% year over year to $25.5 billion.

IDC research also found that Google’s net U.S. market share declined for the first time in two years due to slower growth in domestic fourth quarter sales. The market leader’s net U.S. Internet advertising market share was down 0.5 percentage points to 23.7% last quarter compared to 3Q07. Google’s estimated net U.S. Internet advertising sales (excluding the traffic acquisition costs they pay out to the partners in their networks) grew by a little more than 40% in 4Q07, but its year-on-year growth rate in the quarter before had been 50%.

“If a merger between Microsoft’s new media business and Yahoo! would come to pass, the combined entity would have a net U.S. advertising market share of about 17% based on our 4Q07 data,” says Karsten Weide, program director for IDC’s Digital Marketplace: Media and Entertainment service. “It would not quite bring Microsoft- Yahoo! to where Google is in online advertising in the U. S., but it would give them a much better fighting chance than if they went it alone.”

IDC’s report, U.S New Media Quarterly Wrap-Up and Market Shares 4Q07 (forthcoming), analyzes the net U.S. advertising sales of the most important new media companies. The study is based on a model that is populated with data from companies’ quarterly and annual reports, earnings calls, interviews with company representatives, and news coverage. To calculate the net U.S. Internet advertising sales market shares, the model looks at the quarterly Internet advertising revenues of the top 15 U.S. new media operations, including AOL, CNET, DoubleClick, Facebook, Fox Interactive Media, Google, IAC, Microsoft OSB unit, and Yahoo!.

Karsten Weide and other IDC media and entertainment analysts will be available for one-on-one meetings at IDC’s annual Directions events in March. The one-day events will be held Tuesday, March 11th in San Jose, California, and Wednesday, March 19th in Boston, Massachusetts. For more information, visit http://www.idc.com/directions08/ .