Internet advertising falters for first time in three years

After 13 straight quarters of growth, revenue from online advertisements shrunk slightly. Either way, Internet ad revenue is up year over year.

The data comes from the Interactive Advertising Bureau and shows that overall revenues were still up year over year by 18 percent, to $5.8 billion USD. But this was down slightly from the $5.9 billion recorded in the last quarter of 2007, which was a record.

PricewaterhouseCoopers, the financial firm that conducts the survey for the IAB, wasn't surprised with the decline, saying it was caused by the economic slowdown combined with a typical pullback in advertising that occurs from the fourth to first quarters. This despite the publication of a chart showing no evidence of such seasonality.

"The fundamentals of interactive advertising spend continues to be positive and I would expect to see continued growth in the future," partner David Silverman said in a statement announcing the figures.

The online advertising market is still strong, and growth remains impressive. Since 2004, the market for ads has grown from a $9.6 billion dollar annual business to $21.2 billion in 2007.

2008 looks to be on track for a similar performance, with at least $22 billion in ad sales this year if the industry equals its first quarter numbers through the rest of the year. While this does represent growth, it certainly is slower than previous rates.

From 2004 through 2006, growth rates averaged above 30%. Last year, this slowed to 26%. It's quite likely based on PwC's forecast that this year's growth rate could slow further, falling below 20%.

Depending on the severity of this current economic slowdown, in future years revenue growth could sink further, as businesses reevaluate their expenditures.