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The IAB data yesterday is a good reminder that online advertising revenue growth is the real story in Web 2.0. Jason [CEO of the blogging network Weblogs, Inc.] makes the same point here, and it's an argument I've been making in presentations for years.

As the IAB figure shows, Q3 2006 ad spending was more than all of 1999 combined, as well as being up 33% year-over-year from 2005. Remarkable stuff.

click to enlarge

Q3 2006 Internet Ad Revenue

Of course, the obvious question is the following one: Where does all this ad spending come from? If it's incremental to existing ad spending, then we're going to see a bunch of companies either see spikes in revenue (not likely), or get hit with increased marketing expenditures on their income statement. More realistically, of course, this is money taken from other media, as the following NAA figure shows.

Some of the growth is a reallocation of increased spending, but some of it is pure decline in older media, with broadcast, television, radio, and newspaper struggling in recent years. That is a trend that looks set to accelerate over the next twelve months, which will be financially painful indeed for such industries.

Source: Online Ads Steal the Show From Traditional Media