Internet pushes UK advertising spend to new heights

It appears that early predictions for online ad spending in 2005 have been confirmed, with some commentators estimating as far back as June that expenditure would top £1bn by the end of the year.

The joint Thomson /KPMG report, although it doesn’t give actual figures for Internet spending, concludes that overall advertising spend in the UK was up 5.4%, with television contributing growth of 4%, outdoor advertising up 2%, press adverts unchanged from 2004, and a 4% drop for cinema ads.

Internet advertising spend has a history of exceeding expectations. Having overtaken radio in mid-2004, analysts predicted that it would outstrip its next nearest competitor, outdoor advertising (the branch of the industry covering hoardings, bus shelters and other public displays) in 2006. In the event, that target was achieved in the first half of 2005, a period during which the online ad market grew by 68% to a healthy £490m (figures from the Internet Advertising Bureau) – more than the spend for the whole of 2003. During the same period, growth for the sector as a whole was 3%.

The increase in popularity and availability of cheap broadband connections has been singled out as the most significant factor contributing to the buoyancy of the market; browsing habits have changed with people spending more time, and carrying out more of their day-to-day activities such as paying bills and booking travel, on the Internet.

The ease-of-use of broadband has also played a part, without the inconvenience of tying up the phone line and the overhead of managing dial-up connection settings, more non-technical users are attracted to Internet access. Above all, the explosive popularity of online shopping has provided advertisers with a ready-made consumer audience and a vast amount of information about browsing and buying habits, allowing advertising to be tightly targeted at particular groups.

The growth in legal downloads of music and other media has opened up new frontiers in Internet use, particularly by the young, which advertisers have been quick to recognise and utilise.

Thomson themselves note that their figures are best-guess; accurate information on the actual spend on Internet advertising is not easy to obtain, principally due to the difficulty of measuring expenditure on search advertising, the major area of online growth.

The indications are, though, that display advertising spend may actually be declining (a process possibly hastened by the growing popularity of pop-up blockers and like technologies) as advertisers target the more lucrative search ad market.

Doug Brett-Matthewson


8th February 2006

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