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Now it's official: The Internet advertising business is in the crapper.

For the first time in the four years that PricewaterhouseCoopers has been tracking online advertising, total U.S. online ad revenues have declined from the prior quarter. Internet advertising revenues for the third quarter of 2000 amounted to $1.99 billion, up 63.3% from one year earlier but down 6.5% from the second quarter of 2000.

The quarterly figures, which are drawn from confidential industry surveys, confirm both the recent weakness in the online advertising market yet the long term growth in online advertising. Online advertising is on track to amount to between $8 billion and $9 million in 2000, up from the $4.6 billion that PricewaterhouseCoopers tallied for 1999.

Pete Petrusky, director of the PricewaterhouseCoopers new media group, attributes the softness to three factors: traditional third-quarter slowdown in the ad business, the overall weakness of advertising across different media, and the much-publicized dot-com shakeout. He says he's optimistic that advertising will bounce back in the fourth quarter.

Along with the overall slowdown, the survey indicates two other interesting trends, starting with the slow decline of the banner as a form of online advertising. In the third quarter, banner ads amounted to 46% of ads, down from 55% in the third quarter of 1999. And the top fifty online publishers --

America Online





are at the top of the heap -- are increasing their share of the advertising pie. "Companies are either going out of business or being acquired by larger players," says Petrusky.

The survey is conducted on behalf of the Internet Advertising Bureau trade group.