Net advertising expands at print’s expense

The trade body Interactive Advertising Bureau has said in a report that internet advertising was the only advertising medium that grew during 2008 in both the UK and the US. In Britain it even overtook spending on newspaper and magazine display ads for the first time in the second half of 2008.

The research, carried out for the IAB by accountancy firm PricewaterwaterhouseCoopers LLP and the World Advertising Research Centre, showed that total advertising spend on the internet was £3.35 billion, accounting for one fifth of the total £17.5 billion UK spend.

In the US, internet advertising revenue also climbed in the fourth quarter, totalling $6.1 billion. However, the growth rate was sluggish compared to previous years. The IAB said companies were increasing the Web proportion of their total advertising outlay, because it is cheaper and can be more easily targeted at the right consumer.

Since advertising budgets are being slashed more than ever, marketers have to demonstrate a clear return on their media investment, and accountability is online advertising's trump card, it said.

Earlier this week, new forecasts from media buying agency GroupM predicted that total UK spend on traditional advertising would fall by 16 per cent this year, while the pace of online growth is expected to slow dramatically to 2.5 per cent.

The IAB figures show that Web advertising rose 17 per cent on a year-on-year basis, bucking the overall 3.5 per cent industry fall. "These are really tough times and advertising budgets are being slashed," IAB chief executive Guy Phillipson said in a statement. "More than ever, marketers have to demonstrate a clear return on their media investment, and accountability is online's trump card."

In the second half of 2008, online advertising, which was the smallest medium in 2002, peaked with a share of all advertising spend at 19.8 per cent, overtaking total press display which accounts for all UK newspaper and magazine advertising combined.

The growth makes the UK the world's most advanced market for Internet advertising, with one pound in every five of media budgets spent online. Paid-for search was described by the IAB as the "recession-buster", with growth of 22.7 per cent. Classified advertising grew 22.2 per cent, as advertisers continued to desert newspapers for the digital format.

Phil Stokes, the UK head of entertainment and media at PwC, said consumers were now using the internet as a source of entertainment, and the quality of ads reflected that.

"The growth in broadband household penetration is allowing a far richer mix of video entertainment and advertising to create a `near-TV' feel for mass audiences online," he said. "Advertisers can see new and innovative ways to build and sustain brands with targeted advertising."

Of the different sectors, recruitment was the leading sector when search, classified and display was combined, with automotive, technology, property and finance following. Companies like Google and Yahoo rely on such advertising for their revenues.

In the most recent quarter, revenue from search ads, which make up the largest segment of the online advertising market, rose 13 percent to $2.8 billion. Revenue from graphical "display ads," the second-largest segment, fell 4 percent to $2 billion.

US trends similar
In the US, Sherrill Mane, senior vice president of industry services for the IAB, said any growth at all was a positive sign for an industry that is starting to mature while coping with the recession. David Silverman, a partner at PricewaterhouseCoopers, called the year-over-year growth "remarkable."

For the full year, online ad revenue totalled $23.4 billion - up $2.2 billion, or a bit less than 11 per cent, from 2007. The report said revenue from search advertisements rose 20 per cent in 2008 to almost $10.6 billion. Display ad revenue rose 8 percent to $7.6 billion.

Though still a small segment within the category, digital video ads - such as those one might see when watching a TV show on Hulu - were a bright spot, more than doubling in 2008 to $734 million from $324 million in 2007.

About 10 per cent of all money spent on advertising in 2008 went toward ads on the internet, according to UK-based advertising company ZenithOptimedia. While that is still a small portion of the total, it rose from 8.6 per cent in 2007, while the money spent on newspaper and magazine ads declined over the same period.

After the report from the IAB and PricewaterhouseCoopers was released, digital media research company eMarketer lowered its 2009 estimate for US online advertising revenue to $24.5 billion from a prior expectation of $25.7 billion. That would still represent an increase of about 4.5 per cent - stronger than what the industry posted in 2008.