New York Times

15/11/2006

15/11/06

Comments from Danny Meadows-Klue, in interview with the New York Times on how the UK came to leap ahead of the US in the percentage of ad spend that goes into online.

The UK crossed its tipping point over three years ago. Remember that the UK ad industry has always been brave and experimental, and you need to see the leap to online in that context. I was running the IAB in the UK back then, and massive marketing efforts from the trade associations, combined with rapid product development from the global online media groups, and an explosion of broadband use, together created a climate where the desire for experimentation could be turned into action.

In Europe's fragmented media markets online is giving a cut-through at the very time audiences have been switching off TV commercials and tuning out of print. This is a seismic shift in media consumption and the UK ad industry is reorientating the way all countries will - it's just doing it a little faster because culturally it's always moved fast to embrace the new.

Search is taking around 60% of the online adspend here so this too is different from the US, and for the time being from the rest of Europe where 20%-35% would be more common. Three years ago, customer acquisition marketers started dabbling in search and when they discovered how powerful it could be budgets switched rapidly.

Coming in at 10.5% of national adspend, the internet will comfortably break the £2bn mark this year, leapfrogging national press this Autumn to settle at around 12-13% of total advertising spend. That makes it half the size of the TV ad industry and search larger than the whole consumer magazine market. At eight times the height of it's 'boom' days in 2000, there's no false promise in what online is delivering to its clients.

The real question is how the classic media - in particular television and press - will respond. Online is delivering accountability and creativity, establishing itself as simultaneously a niche and mass medium, and delivering daunting product development and innovation. It's everything advertisers have been looking for, and now has the critical mass of being head to head with TV in audience numbers for a single campaign.

At Digital we've been predicting for a while that internet advertising will exceed TV spend in the UK by the end of the decade. This will then spread across Western Europe and Scandinavia - even without factoring in the 'internet' role in IPTV advertising. The changes in the next five years will dwarf those of the previous ten. Europe's media markets are in the midst of a rapid transition to a whole new landscape of media consumption and advertisers are now catching up to where their audiences have moved.

Some commentators look at the role of the top ten players in the US market and suggest this is the reason for the growth being behind the UK, but I'm not sure that's quite the case. The link between the concentration of inventory and the advertising spend isn't quite that clear to me, and if anything it would suggest that there would be greater economies of scale within the top few publishers that should lead to greater marketing activity to push the industry further.

I'm more comfortable seeing this a the product of three separate sets of factors: those around the cultural attitudes to innovation within the ad industry, those around the national media markets which vary so greatly across Europe, and those around the factors that drive online adspend in all markets.

Truth is that understanding the complexities of this market is deeply challenging. I've been tracking it for twelve years now and I'm still surprised by its nuances, but we shouldn't be surprised that online is now stronger in the UK than the US in terms of ad share. Audiences' time spent with media is higher as a percentage as well and so is the take up of broadband in the home, the home computer culture boomed earlier and higher in the UK back in the 80s than most markets, and it's hard to find people who don't use their cellphones for data as well as voice. With interactive and digital television we should be expecting to see similar differences in the landscape as well.

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