Internet ads $$ to overtake basic cable

Advertising revenue for online media companies such as Google and Yahoo! is growing so fast that these companies will soon overtake the cable industry in advertising revenue, Kagan Research is predicting.

In a Thursday Broadband Advertising report, research associate Erik Brannon said advertising revenues for the top eight Internet companies grew a staggering 61% in the third quarter, led by Google’s almost $1.6 billion in revenue and Yahoo!’s $1.16 billion. By contrast, advertising revenues for the leading cable network operators was up 16%, led by Viacom, whose 25 basic cable networks including MTV, earned $1.65 billion.

Revenues at the top four broadcast channels actually fell 2.3% in the third quarter, over the same period in the previous year.

“Internet advertising is the hot ticket in the future,” Brannon said. “Just to put this soaring growth in perspective, Google generated $4.2 billion in revenue for the first nine months of 2005, which surpasses its full-year total of $3.2 billion for 2004.”

Kagan is predicting that national Internet advertising will reach $11 billion this year, and will continue growing at a compound annual growth rate of 14.3% for the next 10 years. The CAGR for basic cable network advertising in the same period is predicted to be 11.2%.