Online advertising in the UK grew from the smallest sector in 2003 to the third largest in 2007, with more than ?2.8 billion in expenditures – a 38% year-on-year increase -?and a market share of 15.3% (up from 11.4% in ’06), according to findings released this week.
Moreover, online looks set to overtake spending on TV in the UK by the end of 2009, becoming the largest medium, projects the study by the Internet Advertising Bureau (IAB) UK, carried out in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC).
Internet advertising spend is now larger than that of press classifieds and regional newspapers.
In three years online advertising spend has increased by ?2 billion. In a relatively buoyant UK advertising market the internet was the biggest driver of growth? accelerating nine times faster than the entire advertising sector, which grew 4.3% to reach ?18.4 billion.
Below, other findings issued by the IAB.
Display, search and classifieds undergo impressive growth
- Total internet display advertising spend increased 31% year-on-year, while the core formats – banners, skyscrapers and embedded rich media, including video – grew 45% to ?592 million.
- Spend on embedded formats has doubled during the past two years to account for 79% of total display.
- The majority of display spend rests with portals and major online publishers, but an increasing volume is being brought through sales networks. Sales houses and networks are responsible for growing and monetizing the long tail of internet sites, accounting for 40% of display advertising in 2007.
- Paid-search marketing is maturing, but not slowing, as marketers become more sophisticated in their use of the medium:
- In 2007 search grew by 39%, in line with overall growth, to ?1.6 billion (?1.2 billion in 2006).
- Search market share remained largely the same at 57.6% (57.8% in 2006).
- Brands are now using search more intelligently, getting a greater return on investment through key phrases and more accurate targeting that reflects consumer behavior.
- Classified advertising grew 54% year-on-year and was worth ?585.3 million in 2007, as consumers and marketers recognized online’s exceptional reach, flexibility and immediacy.
Categories: Recruitment Leads, New Highs for Retail and FMCG
- The recruitment sector continued to lead the market with 25.7% market share, up 0.9 points on the second half of 2006.
- Second was automotive with 11.9%, while Technology (10.4%) overtook Finance (10%) for the first time to take third place.
- Other areas of growth were retail, which increased 1.7 points, to 5%, as a result of a buoyant ecommerce sector.
- Consumer goods (including FMCG) increased to 5.3%.
- Property climbed the ladder to break into the top five with a market share of 7.9%.
Key Drivers of Growth
- Online audience. There are 32.5 million people now online in the UK, with the average broadband user spending 16 hours per week with the medium.
- Across the board, the online population is continuing to reflect the demographic make-up of the UK as a whole, with a 52%/48% male/female split.
- Young people are slightly more represented online than the population, with 21% of internet users 25-34 years old; those over 50s now represent 30% of total time spent online.
- Cheap laptops mean more machines in the home. Laptops are no longer a luxury item or business tool, with Dell selling wireless-enabled machines for ?199; the result is more people, more eyeballs, more impressions, and more advertising.
- 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.
- Broadband penetration is 90% of the online population (BMRB Internet Monitor, Feb. 2008). The issue now is not whether people have broadband but what their connection speed is.
- 54% of UK broadband users have more than 2mb speed, nearly double the 28% who had the same speed in November 2006 (BMRB Internet Monitor, Nov. 2007).
- The combination of wireless proliferation and rollout of 3g laptop cards has more people online, anytime.
- Social networking websites. Social media continues to have a massive impact on the market, especially as an audience driver.
- In 2007 adspend for this area was relatively low and coming off a small base, yet looks set 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.