The online ad industry, which was written off as dead by many analysts after the dot-com bust of 2000-01, showed more than a little sign of life in the second half of 2002, buttressed by the paid search market, the emergence of rich media, and robust ad sales from top publishers, according to new industry figures.

The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) found the Internet advertising market made a strong comeback in the fourth quarter of 2002, when spending increased to $1.6 billion, up 9 percent from the previous quarter and equal to the total from the year earlier period. The Internet advertising industry took in $6.0 billion in revenue in 2002, a 16 percent slide from the year before. But that decline was not far out of line with the overall drop in ad revenue across all media.

The report, compiled by PwC through a survey of top industry players, included the large and well-publicized restatements made by AOL last year by knocking off $77 million from its 2001 revenue report and $138 million from 2002.

Despite AOL’s restatement, the IAB and PwC found signs that the long decline in the Internet advertising industry finally ended last year. One of the key drivers of this growth has been the emergence of paid search. The keyword advertising market more than doubled in 2002, bringing in $635 million and accounting for percent of the online ad industry. In the fourth quarter alone, according to the report, paid search accounted for more than a fifth of all online ad spending.

The strength of keyword advertising made up for the disappointing performance of the Internet's traditional ad units: banners and sponsorships. Banners brought in $1.7 billion, a 33 percent decline from a year earlier; sponsorships were down 40 percent to $1.1 billion.

The report further found that with 14.2 million broadband subscribers at the end of 2002, more advertisers have turned to flashier online ads for branding purposes, rather than traditional direct response. For the year, rich media spending increased 18 percent to $212 million.

What does that mean for you and your business? The success of keyword advertising through search engines such as Google and the Overture network can help you increase traffic to your site and drive purchasing behavior. Contact your IMA account executive if you would like to learn more about how search term purchases might work for your company.

The report might also suggest that this could be a good time to experiment with regional or niche site banner and sponsorship advertising, given how soft the market continues to be.

In his keynote address to Adweek and MediaWeek’s Interactive Media Conference in San Diego last month, New York Times Digital Chief Executive Officer Martin Nisenholtz told those in attendance that the Internet advertising business was not a case of “if” but “when.” He concluded his remarks with The Rolling Stones 40-year-old blues hit “Time is on My Side.”

But time will only be on your business's side if you understand Internet advertising and the impact it can have.