Internet advertising increased a bit–1.7 percent, precisely–over the past three months. But that’s only when compared with the previous three months, according to the Interactive Advertising Bureau. Compared with the same period a year ago, Web ads are still down 5.4 percent, the trade group said (see chart below; click to enlarge).

Given that I work for a free, ad-supported Web site, I’m anything but an unbiased observer here, and I’d like to put a sunnier spin on things. But recall that the economy started its freefall well over a year ago, so comparisons to Q3 2008 should be particularly easy to beat. Even the boosterish IAB can only call the numbers a “hopeful sign” at best.

Still, if you’re looking for positive signs, you can take Google’s (GOOG) declaration that the worst is over, and I’ve heard plenty of anecdotal stories from small online players that spending is perking up again–though I’m also beginning to hear that some folks may have been overly optimistic about Q4. We’ll know soon.

Some sites, like Discovery’s Planet Green, have already been playing around with the new OPA ads, but if you haven’t seen them yet, you can do it with a little bit of imagination. Think of a traditional Web ad as the equivalent of a yard sign. The new ones are billboards.

Like your descriptions more literal? Here’s the technical description of the new formats. By way of comparison, the column of text you’re reading now is 350 pixels wide.

The Fixed Panel: 336 wide x 700 tall, remains constant as the user scrolls to the top and bottom of the page.
The XXL Box: 468 wide x 648 tall, opens for seven seconds to 936 wide x 648 tall with 1/24x frequency.
The Pushdown: 970 wide x 418 tall, opens to display the advertisement and then after seven seconds, rolls up to 970 wide x 66 tall, with 1/24x frequency.

And um, here’s what a really big ad might look like on your desktop (click to enlarge).

If you’re knee-deep in the online advertising business, you’ll be interested in why these ad formats are being pushed by the Online Publishers Association instead of the better-known Interactive Advertising Bureau. I have heard some baroque/petty descriptions of squabbling between the two groups, whose membership overlaps but isn’t identical. But maybe we’ll come back to that some other time.

For now, let’s see if these deliver as advertised–that is, whether they get marketers to spend more money on the Web, without just plowing the money into Google (GOOG).

That’s one takeaway you can draw from a new study commissioned by an Internet publishing trade group, which concludes, astonishingly, that Internet publishing is an important and vibrant industry.

The data are being served up via the Interactive Advertising Bureau, which tells us the advertising-supported Web industry “directly employs more than 1.2 million Americans with above-average wages in jobs that did not exist two decades ago, and another 1.9 million people work to support those with directly Internet-related jobs.”

Note the “advertising-supported” modifier in the above paragraph, because that’s the real thrust of the IAB’s study/press release: The trade group is trying to get Congress and Washington to let members like Google (GOOG), Yahoo (YHOO) and Time Warner’s (TWX) AOL regulate themselves when it comes to hot-button issues like behavioral targeting.

Hence this quote from IAB boss Randall Rothenberg: “By understanding the total contribution of the Internet to the U.S. economy, we can more accurately assess the impact of potential legislative changes on the Internet’s operations, particularly the consequences of any actions that would alter ad-supported business models.”

OK. Fine. But regulation is tomorrow’s problem. Today, let us celebrate the fact that some of us have jobs! And also, according to the IAB, we’re providing the following:

• Universal access to an almost unlimited source of information
• Increased productivity (output per unit of capital or labor, or increased consumer utility at a lower cost)
• Innovation in business practices, consumer behavior, commerce and media
• Empowerment of entrepreneurs to start small businesses, find customers and grow
• Environmental benefits derived from saving natural resources lowering pollution through the reduced use of petroleum-based fuels and paper

Cool, right? And all this time I thought I was just blogging. You’re welcome! And please keep reading.

[Image credit: respres]

And I think that gap is going to trip up a lot of big players in the years to come.

For a reminder, head on over to NebuAd’s Web site, which no longer works. That’s because the targeting firm, which once employed 60 people, closed up shop on Friday, according to MediaPost.

NebuAd was supposed to work with various Internet service providers and track Web surfing behavior of the ISPs’ customers, then sell that data back to the ISPs. That plan blew up last summer when the company became the subject of congressional hearings, and by last fall just about all of its former clients had run screaming from the company.

The standard response here from ad folks is that NebuAd was a bad apple that practiced a particularly noxious version of targeting. And that the press, lawmakers and the general public don’t really understand how targeting works.

And all of that may be true! But even if it is just a perception problem and the online ad business has only the best intentions when it comes to collecting and using personal Web data, it’s a perception problem that the industry has done a lousy job of fighting.

So said my lunch date today, who’s a veteran of several big online publishing companies, and who tells me that the Interactive Advertising Bureau, the industry’s trade group, is petrified of more NebuAds because they will likely lead to regulation.

Recall that Rick Boucher, a conservative Democratic congressman from Virginia, has already promised to regulate behavioral targeting at the likes of Google (GOOG), Yahoo (YHOO) and Time Warner’s (TWX) AOL. If the thought of that sort of thing is so distasteful to the ad guys, they’re going to have to start selling much more persuasively than they’re doing right now.

The opportunity: The Interactive Advertising Bureau’s numbers for the fourth quarter of 2008–remember all the way back then? If you do, then you won’t be shocked to see that Web advertising slowed way, way down during the last three months of the year. And it did much worse than that at some shops, like Time Warner’s (TWX) AOL.

If you’re a professional optimist, like the IAB’s Randall Rothenberg*, you’ll note that ad dollars are still moving from offline venues to the Web, which makes sense, because that’s where people’s eyeballs have moved. For the year, Web ads grew 10.6 percent, while the overall ad market contracted by 2.6 percent.

But the sourpusses among us will note that Web ads ground to a halt at the end of the year. The IAB says U.S. Web ads grew a mere 2.6 percent during Q4, to $6.1 billion. The year before, they had grown at a 24 percent clip.

Here’s a sector-by-sector breakdown of last year’s market. No surprise: The lion’s share of the business goes to Google (GOOG), as it does every year. (Click to enlarge).

Side note: The video ad market, which was supposed to be a geyser, still has yet to be unleashed, despite the best efforts of YouTube, Hulu, et al. Advertisers spent just $734 million on digital video–about three percent of the market. Positive spin: That’s more than twice the amount they spent in 2007.

* Prior to his career as a professional optimist, Randall used to do excellent work reporting on the ad business. Highly recommended: “Where Suckers Moon,” his 1994 book that went behind the scenes during the creation of a Subaru campaign. Great stuff.

Everyone who wondered why Randy Falco and Ron Grant were still running AOL gets an answer: Time Warner (TWX) was lining up their replacement.

Google (GOOG) sales chief Tim Armstrong becomes chairman and CEO of the troubled Web property, effective immediately.

The move is getting immediate cheers from current and former AOL employees I’ve talked to. The snap consensus is that anyone would have been better than Falco, a longtime NBC executive, and Grant, who was Time Warner CEO Jeff Bewkes’s chief lieutenant before being elevated to his role as President and COO of AOL.

But they’re particularly happy to see a sales guy running the organization: AOL once had a much admired sales operation. But in recent years, the group has been roiled, as a series of sales chiefs came and went. (From Kara Swisher, here are more details on the shakeup, and an interview with Armstrong. And here’s some early betting on Armstrong’s replacement at Google — former Doubleclick CEO David Rosenblatt has a lot of fans).

The current AOL sales chief, former Yahoo (YHOO) sales boss Greg Coleman, was installed just last month. He’s been deep into a reorg of his own.

It was desperately needed after AOL’s miserable performance in 2008, which concluded with a quarter that saw ad revenue drop 18 percent. But those plans may be up in the air now.

In any case, here is the full press release from Time Warner about the firing of Falco and Grant, after the jump:

NEW YORK, March 12, 2009–Tim Armstrong, Google Senior Vice President, has been named Chairman and CEO of AOL, LLC, Time Warner Inc. (NYSE:TWX) Chairman and CEO Jeff Bewkes announced today. Current AOL Chairman and CEO Randy Falco and President and COO Ron Grant plan to leave the company after a transition period.

In making the announcement Mr. Bewkes said: “Tim is the right executive to move AOL into the next phase of its evolution. At Google, Armstrong helped build one of the most successful media teams in the history of the Internet–helping to make Google the most popular online search advertising platform in the world for direct and brand marketers. He’s an advertising pioneer with a stellar reputation and proven track record. We are privileged to have him preside over AOL as its audience and programming businesses continue to grow and its advertising platform expands globally. He’ll also be helpful in helping Time Warner determine the optimal structure for AOL.”

Tim Armstrong said: “I’m very excited about the opportunities presented in leading AOL. AOL has a wide-ranging set of assets and audience. The company is well positioned to enhance those assets into a larger share of the Internet audience and advertiser communities. AOL and Google have been partners for years and I look forward to collaborating with Jeff Bewkes and his team as we explore the right structure and future for AOL.”

Mr. Bewkes added: “Randy led AOL in its transition from a subscription business to an audience business. Under Randy and Ron, AOL’s programming sites exhibited year-over-year growth in unique visitors for 23 consecutive months with many of its sites now in the top five of their categories. They also assembled Platform-A, the number one display ad network in the U.S. with a reach of more than 90%. They also aggressively cut costs as they restructured the Audience business portion of the company into three distinct operating units: People Networks, MediaGlow, and Platform-A. As Randy and Ron move on, they leave AOL with our gratitude and appreciation for remaking the company and bringing it to a new and promising level.”

Tim Armstrong was a member of Google’s Operating Committee and served as the president of the Americas Operations. Under the Americas Operations, Armstrong’s team managed publishers and advertisers’ relationships and platforms with some of the world’s most widely recognized media and agency brands.  Armstrong started at Google in the year 2000 and opened the first office outside of the Mountain View, CA headquarters.

Mr. Armstrong joined Google from Snowball.com, where he was vice president of sales and strategic partnerships. Prior to his role at Snowball.com, he served as director of integrated sales & marketing at Starwave’s and Disney’s ABC/ESPN Internet Ventures, working across the companies’ Internet, TV, radio, and print properties. He started his career by co-founding and running a newspaper based in Boston, MA, before joining IDG to launch their first consumer Internet magazine, I-Way.

Mr. Armstrong sits on the boards of the Interactive Advertising Bureau (IAB), the Advertising Council, and the Advertising Research Foundation, and is a trustee at Connecticut College and Lawrence Academy. He is a member of Mayor Bloomberg’s MediaNYC 2020 committee.  He is a graduate of Connecticut College, with a double major in economics and sociology.

That’s not what the release from the Interactive Advertising Bureau and Pricewaterhouse says, of course. It notes, instead, that the industry notched 11 percent year-over-year U.S. revenue growth in the third quarter of this year, and two percent growth compared to last quarter, which it says indicates a “stabilized” market.

But when the trade group for an industry known for go-go growth says things have “stabilized,” you know things are grim. Here’s what “stabilized” growth looks like in graphic form (click to enlarge):

But here’s the really disturbing thought for everyone who depends on Web ad revenue, or the promise of Web ad revenue (and yes, I’m talking about my employer as well): What would that chart look like without the contributions of Google, which grew 31 percent in the last quarter (and two percent compared to the previous quarter)?

By the IAB’s own count, search revenue makes up a little less than half of its total (44 percent in Q2), and Google (GOOG), of course, accounts for the majority of that market. You do the math. Or better yet, spend that time figuring out how to stay afloat for the next year.