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UK: Digital advertising market
Market growth and evolution

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As someone experienced in the digital sector, you're probably not surprised the latest data revealed another massive leap in the UK market's growth. It paints a bullish picture of the ceaseless boom in online advertising, and one that is funding the vast majority of free-to-air web content. Ever larger campaign budgets are switching online, search engines have cemented themselves as the new customer acquisition channel, brand marketers continue to integrate web media more deeply into their mix, and classified ad volumes continue to flip over from print. All this before the impact of web TV and mobile advertising has even started. With the UK acting as an indicator market for where the rest of Europe heads, the trends are even more enlightening.

Having tracked the online ad economy since the early nineties, several people asked me to provide some commentary on how the sector is evolving, so I thought you might like me to share it with you. As usual the highlights are in the e-mail and there's a short Digital Insight Report at the end of the links. Let me know if it's useful, and if you'd like to talk more about what it means, or if you have a comment to add for one of our discussions, then just mail me back.
Danny Meadows-Klue
Danny Meadows-Klue
Founder and Chief Executive
Digital Strategy Consulting

Digital Insight Report: UK advertising market commentary
Digital Insight Report

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Digital advertising: the switch accelerates

Every year we provide our commentary on the growth of the online advertising market in the UK, the related restructuring in the media industry, and the key trends in this segment of the digital networked economy. This Digital Insight Report examines some of the implications for classic media, reaffirms our predictions from a few years ago that online advertising spend will exceed television within three years, and explores the nature of some of these changes as audiences and ad budgets migrate from classic media channels.

With the professionally produced content sector founded on the advertising model, the continued leap in web ad spend has much wider implications for the future growth and diversity in online media and entertainment. Since 2002 the UK has emerged as an indicator market for much of Europe and the US, providing a rare laboratory into the future of media, so many of the trends explored here will be echoed across those markets.

Since 2000, we have been talking about the digital networked society and the implications for firms as their sectors make the transition. Digital Insight Reports explore patterns within these changes and provide some of the navigation to successfully make the transition.

Speed read

  • UK online adspend market share is now almost 15% of total adspend
  • The sector overtook direct mail in early 2007
  • The first half of the year was £1,334.3 million
  • The growth rate continues to be above 40%
  • These are record setting leaps in online advertising growth
  • Digital Strategy's forecast for the full year remains at £2.95bn
  • The growth in online is offset by dramatic changes in the market share of other channels as budgets are drained from classic media to fuel digital marketing
  • Search engine advertising continues to dominate, but all online formats are growing, with new waves of brand advertising entering the industry
  • Among client sectors, motoring is enjoying noteworthy growth in both classifieds and display, marking a transformation in the role the web plays in the sector

Consistent pattern of growth and substitution
Although the first web advertising was sold in the UK fourteen years ago, the sector only became a mainstream advertising channel here in 2002. The marketing industry continues to be in the midst of a dramatic cultural and structural shift, and the 2007 data about the growth of online advertising spend provides a clear snapshot of the winners and losers. The data in this report is drawn from the recent audits by PricewaterhouseCoopers, in partnership with the IAB, and our commentary explains where we believe the sector is heading next.

The online ad industry has already enjoyed astonishing growth, but this high level of annual expansion will be maintained, as a large range of both supply side and demand side drivers encourage continued increases in advertising investment. Media substitution is an inherent by-product of this as clients reassess the mix of media they need to deliver campaign objectives, and there continues to be a wider discovery within agencies of the value the digital media channels bring to their clients in the digital networked society.

Online advertising growth since the dotcom boom: now nearly £700m in Q2:

Five steps: To get up and running

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

UK online adspend: biggest leap yet
The latest figures confirm the rapid switch to online marketing is continuing in spite of the sector's existing size, challenging any suggestions that the market has matured and is slowing down. In Europe's lead media market, the internet's share of all advertising swelled to almost 15% in the first half of 2007, with further record-setting leaps in real growth. Boosted in particular by massive increases in the supply of media from social networks, and the continued switch of acquisition budgets into search engines, the wider media sector is starting to feel the real impact of the digital networked economy as the models that underpin many print and broadcast players get called into question.

As Digital's team had forecast, online ad spend growth held steady at above 40% year-on-year, giving the largest quarterly rises, and triggering further concerns across the TV and magazine industries about the profitability of classic media.

Key stats

  • First half of 2007: £1,334.3 million
  • First half of 2006: £917.2 million
  • Year on year growth: 41.3%
  • Online adspend market share of total UK adspend: 14.7%

Online advertising: at 15% it's the most advanced market share in the world:

Five steps: To get up and running

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

Digital articles

Digital Insight Report

Perspectives and commentary for firms building business in the digital networked economy

Falling in Love 2.0: Why it's 'all change' in the relationship rules?
The rules of the marketing game have changed. The command and control television era, has finally melted away. In its place a radically new structure has emerged.
Preview ReportContinue reading "Falling in Love 2.0" »

Tracking the skills gap
If you're trying to hire, then you'll know the challenge. A massive shortage in the labour market that stretches from here in Singapore to San Francisco. It's just as big a deal among senior directors, where a whole generation of marketing leaders are struggling to grasp the implications and models of the new channels.
Preview ReportContinue reading "Tracking the skills gap" »

Sizing the gap: Swiss marketers focus on newspapers but audiences' focus switches online
Here in Switzerland it's odd how much newspaper advertising still dominates the marketing mix. While most countries have seen classified ads begin their heavyweight migration to the web, here they are yet to get going. It's an even greater paradox, because broadband penetration is so high.
Preview ReportContinue reading "Sizing the gap" »

Why is it that when consumers shift their media focus, marketers are slow to follow?
Why are Swiss marketers missing out? In this interview we argued that the marketing industry is missing a trick. Audiences have moved to the web, but advertising budgets still over-use the classic media channels. For smart marketers that means they're getting a loud voice online and often without their competitors.
Preview ReportContinue reading "Why is it that marketers are slow to follow?" »

Meadows-Klue on Media

Scattered postings from one person's journey on the road to the digital networked society

Newspapers 'alive and well' online?
Poor performances from British and US newspaper groups, but the British Newspaper Society is championing the number of websites they have.
Preview ReportRead more »

Oldest online newspaper gets newest content format
The web's video content tipping point has firmly been crossed.
Preview ReportRead more »

"Facebook is a right and not a privilege"
The Facebook story just keeps getting better when the TUC table FaceBook in lunch-breaks as a policy issue.
Preview ReportRead more »

Why is September 3rd 2007 a momentous day?
Today is the day my bank manager was able to send me an e-mail.
Preview ReportRead more »

News media pool resources to deal with the ad squeeze
Tough times in the US media market.
Preview ReportRead more »

Estate agents: new medium, old tricks
Scraping websites, breaking copyright: they're doing the lot.
Preview ReportRead more »

Danny Meadows-Klue
"We're still in the early stages of the transition to the digital networked society. The massive growth in online advertising may have fuelled web media, but the same migration of audiences and advertising is now hurting the classic channels deeply. In this decade of incredible social and technological transition, the major changes are yet to come. Firms who plan to survive transition need to become adept at reading the landscape, and adapt quickly based on what they learn."
Danny Meadows-Klue
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