Internet ad spending in the UK grew to £1,682.5 million in the first half of 2008, a 21% year-over-year increase, according to the latest figures from the Internet Advertising Bureau (IAB-UK) in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Center (WARC).
The biannual internet advertising spend study found that the total advertising market was £8982.5 million, down 0.7% year-over-year, during the period from January to June 2008. The advertising market would have experienced a 4.6% decline without the internet’s growth.
In real terms, internet advertising added £348.2 million to its bottom line when compared with the same period in 2007. Online spending exceeded expectations to increase its market share by four points to 18.7%, only 0.6% behind total press display (19.3%) and 3% behind TV (21.7%).
The study suggests strong advertiser confidence in online media – including search, classifieds, rich media and video – at a time when TV, print, outdoor and radio, are experiencing declines.
Online formats surpassed expectations
Technology, finance and entertainment & media top categories
Key growth drivers:
Advertising networks: The rapid rise of advertising networks as efficient, streamlined warehouses that sell display advertising to the internet’s ‘long tail’ are opening up the internet to more advertisers.
Online audiences: The online population now reflects the demographic make-up of the UK as a whole, with a 52%/48% male/female split. 21% of internet users are 25 to 34 years and at the other end of the spectrum, the over-50s now represent 30% of total time spend online.
3G, wireless and inexpensive laptops: Wireless and laptops are no longer a luxury item or confined to business. Mobile network ‘3’ sells more 3G dongles than mobile phones, T-Mobile offers a £10 per month 3G dongle, which coupled with a powerful inexpensive laptop, substitutes for a traditional broadband contract on a fixed-based PC. In Q1 2008, 6% of adults used mobile broadband and in the five months from February 2008, 511,000 mobile broadband connections were sold by the UK’s five mobile network operators. 75% of those with access to mobile broadband use it at home, 18% do so at work and 27% while elsewhere/on the move.
Broadband as commodity: Faster, cheaper broadband, with deals as low as £4.50 per month from Virgin Media are attracting more people online. The proportion of homes taking broadband services grew to 58% by Q1 2008, a rise of six percentage points on a year earlier. By the end of 2007, 58% of UK households had a broadband connection, up from 52% a year previously and from 41% two years ago.
Catch-up TV: Launch of services such as BBC iPlayer and Channel 4’s 4oD are breaking the barrier between video entertainment and the internet as a communications or shopping tool. The Beijing Olympics was the tipping point for BBC iPlayer with a broader demographic profile using the online service. Consumers are responding to this increased supply. Some 27% of those age 15-24 claim to use the internet for watching TV programs in 2008, up by 17 percentage points in 12 months. 45% used it for watching video clips/webcasts, also up by 18 percentage points over the same period.
Social networking websites: Social media continues to have a large impact on the market, especially as an audience driver, the research said. In the first half of 2008 ad spending for this area was relatively low and coming off a small base, but is expected to grow steadily in the coming years. CPM values for user-generated content are lower in this sector and they are generally bought through networks. However, the premium channels such as MySpace Music and MySpace Film are sold at a higher CPM rate.
“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,” said Guy Phillipson, CEO of the IAB UK. “The growth in internet advertising spend is beating all expectations as advertisers look to maximize their budgets, and take advantage of new display advertising formats such as video. They are also increasing their investment in paid-for search marketing because it delivers measurable returns on investment.”
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