Jacquie Bowser, Brand Republic, 07 October 2008, 09:00am

Online adspend up 21% while total ad market falls

LONDON - Internet advertising expenditure grew 21% year on year in the first half of 2008 to £1.7bn as the total ad market fell by 0.7%, according to the Internet Advertising Bureau.

In real terms, online adspend increased by £348.2m when compared with the same period in 2007.

The rise came as the total ad market fell 0.7% year on year to £9bn, as TV, press, outdoor and radio all experienced falls in expenditure.

Online has therefore increased its market share by four points to 18.7%, only 0.6% behind total press display (19.3%) and 3% behind TV (21.7%).

Paid-for search continues to lead the way, growing by 28% year on year and was worth £981m in the first half of 2008, with its market share marginally up to 58.3% of total online advertising (57.8% in first half of 2007).

Total internet display ad spend rose 16.3% year on year to £334m. This was boosted by a 36.6% increase in spending on embedded formats such as banners, rich media and video.

Classifieds grew by 30.2% year on year to £361.6m as recruitment, property, automotive and small ads continued their migration to the internet from print classifieds, which declined 10% year on year.

Can internet ad spend weather the economic downturn? Vote in our poll.

Guy Phillipson, chief executive officer of the IAB UK, said: "Online is not immune from the economic downturn, but while other sectors see falls in expenditure the internet is still experiencing an incredible increase and is propping up the entire advertising market.

"The growth in internet advertising spend is beating all expectations as advertisers look to maximise their budgets, and take advantage of new display advertising formats such as video."

The research was carried out in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC).

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All Comments

Peter McCormack - 07 October 2008

This is hardly surprising when traditional marketing channels deliver CPEs over 10 * that of paid search. The argument from traditional media buyers about brand building is becoming less relevant in a tough economy.

robin caller - 07 October 2008

But Peter, search is not the real bellweather for the online industry as a whole. So Google and Yahoo do fine, but what about the rest of the sector. Oanda.com is a financial site showing "smiley" ads today. The key indicator there is that online "display" was already the slowest growing channel. That suggests online is not exactly going to enjoy significant growth in "brand spend" in a recession, and you really have to ask yourself if the industry "as a whole" is going to be ok.

The last 10 years has seen a continued fear in the behaviour of online publishers. They are still too afraid to "interrupt" their users, driven by fear tha the users will simply abandon their site for a competitor. Users have not "bought" a site like they buy a magazine etc, so publishers are afraid to use the equivalent formats. Hence, even though display rose with rich media as the driver, this is being massively hampered by the publisher fears.

I think that this recession may be the making of the web for brand advertising. Maybe finally the publishers will reach the point where they accept that they may as well interrupt their users as a better option to running sites that dont really make them any money.

Advertisers have to realise that paid search is the "anomaly" and not the rule. If they are willing to spend 5X the cost of search in other online channels, they will reap results. But the sellers of space need to bring the attractive offerings now, rather than just leaving banners "top and right" as they appear on this site, for example.

Oli Felstead - 07 October 2008

Internet advertising continues to grow at a staggering rate, however if FMCG manufacturers are going to shift their budgets online they need to be able to measure direct consumer response, not just to the online experience but how that translates to offline sales.

The use of Internet printable coupons now provides FMCGs with a vehicle to bridge the gap between online spend and product purchase. With a 650% increase in coupon prints in 2007, forward-thinking FMCGs are starting to seriously use this new mechanic to provide an accurate insight into the effectiveness of their online campaigns.

By utilising Internet printable coupons, FMCG marketers are able to track and measure consumers' behaviour online to offline, from point of clicking on a website or email through to redeeming the coupon or voucher in store.

And, as every coupon printed by a consumer is completely trackable, brands can measure the success of specific offers and iteratively tailor their campaigns to optimise the reach the Internet provides.

Internet printable coupons offer FMCGs a tangible, measurable way of achieving direct consumer to brand interaction and, as FMCGs struggle to stand out from the crowd, provide a compelling reason for shifting marketing spend online.

Oliver Felstead, www.couponstar.com

joe woollen - 07 October 2008

I feel like the comments are longer than the article itself.

Ex-media planner - 07 October 2008

They're about as interesting as each other too

Ian Crick - 08 October 2008

Going off on a slight tangent, I would politely disagree with Peter McCormack's stats on CPE's. Firstly, all products are different and thus have very different purchase funnels and CPEs. But that aside, the specific stats provided seem to reflect a 'last click wins' measurement approach. The work Billetts do with our clients indicates a much more complex reality once CPEs have been correctly attributed. For example, in many sectors over 80% of TV effectiveness might be wrongly attributed to PPC because it was perceived that if the customer arrives via PPC then PPC was also the sole influence on the purchase - clearly this approach fails to understand or face up to a more complex reality where people are usually influenced by a series of interrelated 'touchpoints'. Attributing CPEs to PPC without measuring the influence of other channels in driving the customer there is going to be highly misleading. www.ebiquity.com. Cheers

ANDREW CHALLIER - 08 October 2008

Too often this type of article provokes a sort of "four legs good, two legs bad" Animal Farm reaction - i.e., old media is bad and new media is good.

The danger of introducing a new myopia to replace the old is very real. For example, FMCG printed coupons, apart from being environmentally questionable, are merely re-inforcing the fact that promos give a better short-term return in general than advertising. It is nothing to do with the internet being a more effective medium. The comparison should be a coupon vs in-store promotion.

The issue about brand building is the old "Value = Satisfaction-Price" equation; too often, the only reason price wins is because their is too little true product differentiation and consumer 'advantage'. In a non-differentiated market with multiple suppliers, commoditisation is the inevitable result, with a concomitant lowering of price the obvious side-effect.

At Billetts we aim to offer a voice of balance and reason.