Analysis: Bellwether reveals maturing market

and 29.3 per cent 'all other' marketing.

Overall, the IPA's quarterly survey of marketing spend found that
budgets were, on average, revised down for the first time in a year in
the final quarter of 2007. This marks the steepest fall in nearly two
years.

Revisions to marketing spend are being put down to companies trimming
budgets to maintain margins in the face of weaker-than-expected sales,
disappointing profits and concerns about the general economic
climate.

Worried?

Should the digital world be worried about experiencing the lowest growth
levels to date?

Wayne Arnold, European chief executive of digital agency Profero and
chairman of IPA Digital, remains positive: "The fourth-quarter report
shows yet another impressive increase in investment in the internet
market, with an upward net revision of more than 16 per cent.

"The fact that it was the lowest growth since the third quarter of 2003
illustrates the positive reality that the internet is now core to many
clients' marketing needs so, unfortunately, it is not entirely immune to
the current economic climate," he adds.

The accountancy firm Deloitte has also recently reported that the rapid
growth seen in digital spend over several years now was unsustainable,
and that expansion would be more modest this year. The report cited
numerous obstacles to maintaining such high growth levels, concluding
that public antipathy to online ads could fast become one of the
sector's greatest challenges.

The accountancy firm made this claim based on research revealing that
one in four internet users would actually pay to avoid being served ads
online. Deloitte warned that this anti-advertising sentiment would only
be likely to increase among users as social networks become increasingly
reliant on advertising as a revenue stream.

While growth in online adspend was less marked than ever, a healthy
proportion of companies have still increased their digital budgets. Some
23 per cent of the 250 companies that Bellwether surveyed, which
represent all business sectors, increased their budgets for internet
advertising.

Only seven per cent cut their internet budgets. Online search, which is
also now being monitored by Bellwether, saw the same pattern.

According to Maurice Levy, chairman and chief executive of Publicis
Groupe, these figures merely reflect what we already knew. "The main
trends are confirmed," he says, "Less attraction of traditional media
and more digital and interactive.

"There is undoubtedly some turbulence in our old countries of Europe
and, for our industry, we know that we find growth in digital and
emerging markets," he added.

Voices across the industry echo the sentiment that the Bellwether Report
offers up few surprises. "There's been so much talk of doom and gloom in
recent months about the economic climate that the overall dip comes as
no surprise," agrees Ed Ling strategy director of i-Level.

Budget growth

"While it's interesting to hear of the steepest decline in internet
spend in nearly two years, we have seen overall budget increases over
that period. The rise of the internet has been propping up that growth,"
Ling says.

The figures apparently reflect what i-Level has been seeing on a
day-to-day basis. Across the board, clients have been ramping up their
digital spend. This is true not just of the usual suspects (such as
telecoms and financial services clients) but also with 'very large'
online budget increases from the usually more tentative FMCG
clients.

According to Ling, the latest figures do not mean that online
advertising has plateaued. "Lots of brands have been playing catch up
with the more enlightened brands," he says. "Now mainstream clients are
investing in digital, and a slowing of growth is inevitable."

As Ling points out, the internet is set to be the dominant force behind
UK adspend growth during the next 12 years (Advertising
Association).

Maturing market

"If television spend is at £4 billion, and digital is at £2.7bn, there is clearly a lot of growth yet to come, albeit at a slower
pace," says Ling. Slower growth appears to be a sign of a maturing
market as opposed to anything more serious, he adds.

Very few industries are actually growing at the moment, and on a more
positive note, Arnold points out that internet growth has outstripped
any other medium yet again. "At any other time we'd be popping the
Champagne," he quips.

Arnold adds that the Bellwether Report doesn't accurately reflect what
he's seen among Profero clients - whose online budgets are actually
outstripping the report's claims.

It makes sense that the sort of clients that would use Profero (and
other successful digital agencies) would be those that are most aware of
the potential of digital, and invest in their future.

The future for next year could be brighter still, as the Olympics and
European Football Championships invite budget increases. As Arnold
points us, people go online to seek information about sport as it
happens.

"Over the next year, internet adspend will still grow at a phenomenal
speed. Rather than the 41 per cent-plus year-on-year growth we have
witnessed, it may be around the 30 per cent to 35 per cent mark - still
very healthy," concludes Arnold.