Internet Advertising spending experienced a sharp turnaround in 2003, as reported in an IAB report, improving 21% from the previous year to $7.2B. Advertising is a leading indicator for other sectors, so even if you aren't an ad man, pay attention.
Back in October of 2002 I pointed to signs of an ad recovery, how advertising correlates with GDP and described the "multimedia cycle." Here is a linear representation of the cycle, where advertising spending drives spending in other sectors:
Ads -> Content -> Applications -> Telecom Services -> Telecom Infrastructure
One part of the theory of this cycle is that the market flocks to abundant infrastructure (Says Law). In other words, demand for bandwidth is elastic, like a vacuum. Which creates new opportunities for development. Of course, during the bust companies couldn't take advantage of new arbitrage opportunities. Enter the individual, social production systems like open source and nimble bootstraps.
Over the past year this chain has changed. Ad formats, like all markets, trend towards diversification. Search engine keywords grew from 15 to 35% and are increasingly targeted (think Google Adwords). User generated content was well on the rise, not because of advertising dollars, but social incentives. Interesting times when individuals can create content and support it through ad revenue. But be wary of those who call content communication. Open source and the LAMP stack has decreased the cost of providing applications. Telecom is undoubtedly a commodity, retail markets hamstrung by regulation games while wholesale prices are stabilizing while demand and supply grow at 60%.
The bust was a shock to the system that forced cost-cutting and optimization. Whatever ads drive, the remaining chain will be more productive.
If ad spending continues, it will drive the success of consumer internet plays. Take social networking, for example, where users spend twice as long, 2 hours a visit on Friendster, than traditional dating sites. Friendster and others are already swamped to a crawl in supplying demand.
Advertising could also flock to the abundance of supply of ad space on blogs, driving benefits to supporting applications, but we don't have our act together.