UK Online Adspend Grows Almost 40% Year On Year In 2007

Online advertising grew almost 40% year on year in 2007 to a new high of over £2.8 billion, according to the latest IAB and PwC research released today.

This makes the medium the third largest last year, up from being the smallest market sector in 2003, taking its share to 15.3% from 11.4% in 2006.

Internet advertising spend in 2007 exceeded forecasts and is now larger than press classifieds and regional newspapers. The study reveals a continued healthy growth as online looks set to overtake spending on TV by the end of 2009.

In just 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 experienced 4.3% growth to reach £18.4 billion.

Display, search and classifieds all experience impressive growth. Total internet display advertising spend saw a 31% year on year increase, whilst the core formats – banners, skyscrapers and embedded rich media including video – grew by 45% to £592 million. Furthermore, 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 monetising the long tail of internet sites, accounting for 40% of display advertising in 2007.

Paid-for 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), while its 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 behaviour.

Classified advertising saw a 54% year on year growth and was worth £585.3 million in 2007, as consumers and marketers recognise online’s exceptional reach, flexibility and immediacy.

Recruitment leads as Retail and FMCG hit new highs The breakdown of industry categories revealed that 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 by 1.7 points to 5%, as a result of a buoyant ecommerce sector, with Consumer Goods (including FMCG) increasing to 5.3%, while Property climbed the ladder to break into the top five with a market share of 7.9%.

Guy Phillipson, chief executive of the IAB, said: “To grow 38% from £2 billion to £2.8 billion is a very powerful performance, and with 16% share of media spend, the UK is head and shoulders above all other major world markets.

“It’s clear marketing directors now recognise the value of online to drive their business, and more and more are using rich media and video to build their brands, just as they do on TV.”

He continued: “With broadband speeds on the up and consumers spending more time on more sites, the outlook for online advertising is rosy – in fact we expect it to overtake TV in 2009 when it will become the UK’s biggest medium.”

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.

In fact, young people are slightly more represented online than the GB population, with 21% of internet users being 25 to 34 years and at the other end of the spectrum, the over 50s now represent 30% of total time spent online.

The launch of services such as the BBC iPlayer and Channel 4’s 4oD are sending more people online, whilst broadband penetration and speeds are increasing.

Social media also 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, according to the IAB.

IAB: 020 8683 955 www.iabuk.net PwC www.pwc.co.uk