Forecasts bleak for web ad expenditure

eMarketer have released a report suggesting that UK internet advertising expenditure will grow by only 7.2% in 2009 – more than 50% lower than the prediction of 17.2% growth that the same firm made in May this year.

This still means that web advertising will still significantly outperform other media, with any kind of positive growth a boon in the current economic climate. This continued growth can be attributed to the seeming immunity of the sector to budget cuts by advertisers and marketers, largely due to the efficiency and efficacy of a large and fiercely competitive labour market.

But the global economic downturn is causing even online advertising to tighten its belt, with the eMarketer report suggesting that it may take as long as three years for a full recovery to occur, assuming that there are no further large-scale shocks. The firm indicates that the industry will achieve higher growth in 2010 and 2011 followed by a sharper upturn in 2012, largely due to increased opportunities associated with the London Olympics.

This news follows earlier reports from eMarketer that the social media sector in particular is due to contract sharply in the New Year. Having predicted growth of $1.8 billion in 2009, the research firm now predicts a rise of only $1.3 billion – a cut of 28%. This is partly due to the experimental nature of social marketing, which balances out the undoubted possibilities of social networks in reaching customers who have already revealed brand-specific interests.

Karin von Abrams, the author of the eMarketer report, says that “the good news is that even though advertising in traditional media is down sharply, online is bucking the trend, at least to an extent” and that even though budgets are set to tighten, “many forms of online advertising, such as paid search and e-mail marketing, rank high in terms of accountability and return on investment.”

We are likely to see less experimental marketing coupled with a greater focus on proven strategies. Just as in the High Street, where consumers have flocked to take advantage of cheaper alternatives in a wave known as the ‘Lidl effect’, austerity is cool even in one of the few major growth areas of the British economy.

This news follows on the heels of a forecast of more widespread woe for the global advertising market, with Group M showing a predicted contraction of 0.2% next year, revised from a heady growth forecast of 4.5% in the summer. Although a collapse for the industry is not expected, Group M share eMarketer’s concerns over recovery, suggesting that there is plenty of light at the end of the tunnel – but that the tunnel might be a longer one than those of 1991 and 2001.

A second report, from ZenithOptimedia, echoed Group M’s predicted 0.2% figure for the global advertising spend, but suggests that television advertising will benefit from the downturn, with a record 38.5% share of the total ad spend in 2010 and 2011. "Television is doing relatively well in the downturn. As happened in the previous two downturns, advertisers will continue to shift their expenditure from secondary media to television, being familiar with its power to build brands," the agency said.

Tom King


18th December 2008

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