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
Founder and Chief Executive
Digital Strategy Consulting

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:

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:

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

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

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Continue reading "Why is it that marketers are slow to follow?" »

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