Broadband Uptake Fuelling Online Adspend
The internet’s increasing presence in the media mix has been a hot topic of debate for marketers and advertisers, with industry forecasts expecting the medium to continue its surge in popularity through 2006 and beyond.
A study published last year by online magazine, Direct, revealed that increasing awareness of online advertising has resulted in marketers shifting their adspend onto online, with 60% planning to raise their online advertising expenditure in 2006 (see Marketers Move Adspend Online).
The latest Bellwether Report from the IPA revealed that budget increases were seen in direct marketing and internet related activities within 2005, with internet marketing in the UK now accounting for 4% of spend (see Broadband Value-Added Services 60% Up In 2004).
Looking towards 2006, Chris Williamson, from NTC Research and author of the Bellwether report said: “Early signs are that marketing spend will rise during the year, but growth is likely to remain subdued and we are set to see a further shift away from main media advertising towards direct marketing and the internet.”
Carat also looked at increasing trends in marketers allocating budgets to online spend, with the media agency claiming the shift is resulting in television’s share of adspend levelling out and newspaper’s declining (see Carat Upgrades 2005 Global Adspend Forecast To 5%).
These insights are echoed in recent research issued by Borrell Associates, revealing that the internet looks likely to become just as strong an advertising medium, if not stronger, than television (see Internet Adspend Forecast To Overtake TV).
Borrell claims that internet advertising has enjoyed a compound annual growth rate of 51.4% in its first ten years, while broadcast TV’s was 42.7% in its first decade and cable TV at 37.3%.
Despite varying predictions, the industry consensus is that online advertising expenditure will outpace all other media in terms of growth in 2006, with global estimates from Piper Jaffray(see Online Ad Growth To Surpass Expectations In 2006) and investment bank Credit Suisse(see Online Adspend Set To Increase Through 2006) projecting a rise of 30% and 32%, respectively.
Estimates recently released from Initiative Media expect online adspend to enjoy the fastest adspend growth out of all advertising mediums in the UK, enjoying growth of 26.3% year on year in 2006 (see UK Adspend To Rise By 3.7% In 2006).
OPera Media also expects online advertising to enjoy a surge in popularity over the coming year, increasing by 35% in 2006, with its value forecast to reach £2.3 billion by 2010, up from £912 million in 2005. The medium’s share is projected to hit 10% by 2007 (see UK Adspend To Hit £15 Billion By 2010).
Turning to the US, eMarketer asserts that the internet looks set to dominate the media world, with 5.4% of all adspend forecast to be devoted to online advertising in 2006, marking the first time the figure has exceeded 5% (see Top Trends Forecast For 2006).
By 2009, the analyst claims that internet adspend will rise to over $22 billion, representing 7.5% of all advertising spend.
Unlike other industry forecasts, TNS Media Intelligence estimates a relatively moderate rate of growth for online adspend during 2006, expecting the media to rise at 9.1%.
However, the media body pointed out that its internet predictions exclude paid search, which is one of the fastest growing segments of online advertising (see Popularity Of E-Shopping Continues To Grow).
Estimates from Universal McCann are slightly more optimistic than TNS. Like other predictions the agency expects the internet to be the fastest growing advertising medium in 2006, rising by 10% year on year (see McCann Expects US 2005 Adspend To Rise By 4.6%).
Online advertising’s impressive entrance into the media world has been fuelled by the dramatic uptake of broadband, with the medium enjoying strong penetration rates globally (see Europe Online Adspend Sees Strong 2005).
As a result internet advertising in Europe is growing rapidly, with eMarketer revealing that internet adspend in the five largest nations in Western Europe, France, Germany, Italy, Spain and the UK, reached €1,863 million in 2005.
According to the analyst’s Europe Online Advertising: Spending Trends & the Target Audience report there will be 154.1 million internet users in the five largest Western European nations, with the largest group coming from Germany.
Recent research from Datamonitor claims that consumer broadband is increasing at its fastest rate across most of Europe, with penetration expected to settle at around 60% in advanced markets (see Europe Sees Surge In Broadband Adoption).
Out of the various types of broadband technologies, digital subscriber line (DSL) was shown to be the most popular type of connection on offer, with Datamonitor stating DSL has already achieved good penetration levels in most markets.
Estimates released by Point Topic at the beginning of the year, reveal that the UK has overtaken France as the largest broadband country in Europe. According to the broadband monitor, the UK had 9.8 million broadband lines by New Year’s Day 2006 compared to France with 9.7 million (see UK Overtakes France As Largest European Broadband Country).
The expected strong performance comes on the backend of a healthy third quarter for DSL uptake in 2005, with Point Topic revealing that during the first nine months of 2005 the UK added nearly 2.8 million broadband lines, while France added 2.2 million (see Global Broadband Lines Up By 9% In Q3 2005).
As broadband penetration looks set to increase, online advertising continues to be a dominant force in the advertising industry. The internet is no longer the domain of early adopters and technology savvy consumers, with more and more people from different age groups coming online.
It seems that in order to target this ever increasing audience advertisers need to harness the ever expanding power of the web, understand its users and market to them effectively. Online advertising, in its many forms, is here to stay and on the rise.