Online Advertising: UK
Summary
Report looks at the current market position for online advertising in the UK, including expenditure trends, share of revenue and forecasts.
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Contents
- Current Market Position
- Formats
- Industry Sectors
- Advertising Medium Debate
Featured Tables & Charts
- % Share of UK Advertising Revenues
- UK Internet Trend: Share of Advertising Revenue
- Share of UK Online Advertising Expenditure
- UK Online Advertising Forecast
7 pages, featuring 4 tables and charts
Current Market Position
Online is now reported to be the largest advertising medium in the UK, following the release of the latest figures from the IAB.
Its latest online adspend study in conjunction with PricewaterhouseCoopers and the World Advertising Research Centre shows that internet advertising had grown by 4.6% in the first half of 2009, despite the overall advertising sector contracting by 16.6% during the same period.
It achieved £1.75 billion in the first half of the year, up £82 million, meaning the medium had now overtaken television for the first time to become the UK’s largest advertising medium; see Figure 1.
Online advertising revenue overtook radio adspend in 2004, well before it was predicted to do so. Since then, the medium’s advertising share has overtaken that of outdoor, national newspapers and direct mail.
Understandably in the current economic climate, growth rates are much smaller than in previous periods, but to achieve any growth in the current market should be commended.
Full year figures released earlier in the year for 2008 showed that online advertising spend had increased by 17.1% year on year, reaching £3.4 billion, an increase of £540 million year on year. By comparison, in 2007, online advertising spend grew by 38% in the UK, reaching £2.8 billion.
Following several years of huge growth, the medium now commands a 23.5% market share of all advertising spend, according to the IAB; see Figure 2.
Guy Phillipson, chief executive of the Internet Advertising Bureau, said: “Internet advertising has beaten all expectations to achieve growth in the most challenging market conditions.
“We have a rollercoaster of a year ahead but even in tough economic conditions marketers still recognise the value, accountability and measurability of online advertising.”
Formats
Paid-for search now accounts for 59.8% of all online advertising, following a 6.8% increase from H1 2008 to H1 2009, with marketers investing £1.05 billion in search during the first half of 2009; see Figure 3.
Online display (including banners, skyscrapers and embedded formats) fell 5.2% year on year to £316.5 million, making up 18.1% of online’s advertising, while classified advertising together with solus ads now takes up 19% share of online spend.
Guy Phillipson, chief executive of the Internet Advertising Bureau, said: “Online display has performed notably well against its peers in TV, print and radio despite more than £1.5 billion being wiped off the advertising industry.”
The search figure is expected to continue to grow for at least a few more years, with the search market expected to reach £3 billion by 2012.
In its report, On Media: Navigating Choppy Waters, PricewaterhouseCoopers believes that display spend is the segment most vulnerable to the effects of the economic downturn due to its focus on brand advertising and limited measurability.
January 2010 sees the first data from the newly launched UKOM (UK Online Measurement) being released to the industry. The IAB has teamed up with Nielsen to produce UKOM, which will provide an industry standard online measurement metric that can be used across the industry, and included within the new TouchPoints 3 system released in summer 2010.
One of the aims of UKOM is to increase the percentage of online spend that is brand display advertising, which is currently estimated by Matt Simpson, head of digital, OMD Group, as 5% of total online spend.
Industry Sectors
During the first six months of this year, the IAB study showed that the biggest spend by category was technology, accounting for 19.1% of the market, followed by telecoms (13.3% up from 9.7% in H1 2008) and finance (13.2% up from 11.9%).
Entertainment and media was fourth with 11%, while consumer goods grew from 6.2% in H1 2008 to 8.1% in H1 2009, boosted by FMCG marketers increasing their digital budgets.
Forecasts
The years of double digit growth are certainly behind the medium now, especially as we move through a very difficult year for the advertising industry. Bearing that in mind, forecasts of flat from Enders and 2% growth from GroupM make very positive reading. As the IAB say, ‘’In 2009, flat is good!”
eMarketer has cut its forecast for UK online ad spend, predicting that it will grow just 0.9% in 2009, down from its December 2008 forecast of 7.2% and May 2008’s highly optimistic forecast of 17.2%; see Figure 4.
Karin von Abrams, eMarketer senior analyst and author of the new report, said: “In 2009, online ad spending has been hit harder than most UK marketers thought possible even a few months ago.
“Budget cuts have affected all industry sectors, including many that contributed significantly to online ad spending, notably banks and financial services, automotive and retail.”
However, internet spending is expected to regain some momentum in 2010, when the economy begins to rebound, and approach 10% growth in 2011. The London Olympics will fuel a further spurt of activity in 2012 and push spending growth into double digits, said eMarketer.
von Abrams added: “In the UK, online advertising still accounts for a higher proportion of total advertising spending than in any other European market.”
The IAB Europe’s new annual AdEx Report predicts that UK display online adspend will decline by 4% this year, the first fall since 2001.
UK online display adspend is forecast to fall 4% year on year to €628.5 million, although a 3% increase is expected in 2010, to €647.4 million. UK search advertising, meanwhile, is forecast to grow by 3% in 2009, to €2.1 million, with a 4% increase in 2010.
Advertising Medium Debate
As online continues to overtake the advertising share of some of the traditional media, there is growing debate as to whether the internet can be classed as a true advertising medium. Display advertising within online accounts for under a quarter of all its revenue. However, calculations for the medium’s share currently include paid-for search, giving the medium a market share of over 20%.
Some key industry figures claim that search is not advertising, but rather a sales and marketing tool. As such should not be included in any expenditure figures for online’s display advertising.
Online is now reported to be the largest advertising medium in the UK, following the release of the latest figures from the IAB.
Its latest online adspend study in conjunction with PricewaterhouseCoopers and the World Advertising Research Centre shows that internet advertising had grown by 4.6% in the first half of 2009, despite the overall advertising sector contracting by 16.6% during the same period.
It achieved £1.75 billion in the first half of the year, up £82 million, meaning the medium had now overtaken television for the first time to become the UK’s largest advertising medium; see Figure 1.
Online advertising revenue overtook radio adspend in 2004, well before it was predicted to do so. Since then, the medium’s advertising share has overtaken that of outdoor, national newspapers and direct mail.
Understandably in the current economic climate, growth rates are much smaller than in previous periods, but to achieve any growth in the current market should be commended.
Full year figures released earlier in the year for 2008 showed that online advertising spend had increased by 17.1% year on year, reaching £3.4 billion, an increase of £540 million year on year. By comparison, in 2007, online advertising spend grew by 38% in the UK, reaching £2.8 billion.
Following several years of huge growth, the medium now commands a 23.5% market share of all advertising spend, according to the IAB; see Figure 2.
Guy Phillipson, chief executive of the Internet Advertising Bureau, said: “Internet advertising has beaten all expectations to achieve growth in the most challenging market conditions.
“We have a rollercoaster of a year ahead but even in tough economic conditions marketers still recognise the value, accountability and measurability of online advertising.”
Formats
Paid-for search now accounts for 59.8% of all online advertising, following a 6.8% increase from H1 2008 to H1 2009, with marketers investing £1.05 billion in search during the first half of 2009; see Figure 3.
Online display (including banners, skyscrapers and embedded formats) fell 5.2% year on year to £316.5 million, making up 18.1% of online’s advertising, while classified advertising together with solus ads now takes up 19% share of online spend.
Guy Phillipson, chief executive of the Internet Advertising Bureau, said: “Online display has performed notably well against its peers in TV, print and radio despite more than £1.5 billion being wiped off the advertising industry.”
The search figure is expected to continue to grow for at least a few more years, with the search market expected to reach £3 billion by 2012.
In its report, On Media: Navigating Choppy Waters, PricewaterhouseCoopers believes that display spend is the segment most vulnerable to the effects of the economic downturn due to its focus on brand advertising and limited measurability.
January 2010 sees the first data from the newly launched UKOM (UK Online Measurement) being released to the industry. The IAB has teamed up with Nielsen to produce UKOM, which will provide an industry standard online measurement metric that can be used across the industry, and included within the new TouchPoints 3 system released in summer 2010.
One of the aims of UKOM is to increase the percentage of online spend that is brand display advertising, which is currently estimated by Matt Simpson, head of digital, OMD Group, as 5% of total online spend.
Industry Sectors
During the first six months of this year, the IAB study showed that the biggest spend by category was technology, accounting for 19.1% of the market, followed by telecoms (13.3% up from 9.7% in H1 2008) and finance (13.2% up from 11.9%).
Entertainment and media was fourth with 11%, while consumer goods grew from 6.2% in H1 2008 to 8.1% in H1 2009, boosted by FMCG marketers increasing their digital budgets.
Forecasts
The years of double digit growth are certainly behind the medium now, especially as we move through a very difficult year for the advertising industry. Bearing that in mind, forecasts of flat from Enders and 2% growth from GroupM make very positive reading. As the IAB say, ‘’In 2009, flat is good!”
eMarketer has cut its forecast for UK online ad spend, predicting that it will grow just 0.9% in 2009, down from its December 2008 forecast of 7.2% and May 2008’s highly optimistic forecast of 17.2%; see Figure 4.
Karin von Abrams, eMarketer senior analyst and author of the new report, said: “In 2009, online ad spending has been hit harder than most UK marketers thought possible even a few months ago.
“Budget cuts have affected all industry sectors, including many that contributed significantly to online ad spending, notably banks and financial services, automotive and retail.”
However, internet spending is expected to regain some momentum in 2010, when the economy begins to rebound, and approach 10% growth in 2011. The London Olympics will fuel a further spurt of activity in 2012 and push spending growth into double digits, said eMarketer.
von Abrams added: “In the UK, online advertising still accounts for a higher proportion of total advertising spending than in any other European market.”
The IAB Europe’s new annual AdEx Report predicts that UK display online adspend will decline by 4% this year, the first fall since 2001.
UK online display adspend is forecast to fall 4% year on year to €628.5 million, although a 3% increase is expected in 2010, to €647.4 million. UK search advertising, meanwhile, is forecast to grow by 3% in 2009, to €2.1 million, with a 4% increase in 2010.
Advertising Medium Debate
As online continues to overtake the advertising share of some of the traditional media, there is growing debate as to whether the internet can be classed as a true advertising medium. Display advertising within online accounts for under a quarter of all its revenue. However, calculations for the medium’s share currently include paid-for search, giving the medium a market share of over 20%.
Some key industry figures claim that search is not advertising, but rather a sales and marketing tool. As such should not be included in any expenditure figures for online’s display advertising.