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And now WPP announce their numbers: 10% of global marketing spend next year will be online. Is there a race for the largest number emerging? Great to see the pace and enthusiasm, but just remember when reading all the stats that the market is incredibly diverse and only a few countries have online adspend taking more than 10% today. Trying to quantify the web dev spend remains chaotic, email investment is untraceable, and even SEO is slippery but the adspend growth rate is a useful indicators for how the others are trending.

Check out http://www.directtraffic.org/OnlineNews/Internet_advertising_to_grow_30_percent_around_the_world_18381583.html

Migration to the web and from print

The switch to the web from print hasn’t finished yet in the UK. The migration of classifieds is well underway, and directories are now mid-migration from classic channels to databases, but the lion’s share of budget the migration hasn’t yet taken place. Display advertising – both in print and on TV – will find new tools, channels and formats to move into on the web over the next couple of years. Although a good portion of this may still be under the wing of the brands clients used in classic media, there is inevitably a switch in budgets to the dorcom pureplays and the new digitally native businesses. That makes for some tough times still to come for print media groups, and although it doesn’t offer much reassurance for those selling print advertising, for media brands who have fully embraced the new channels there is a clear opportunity to cross package and create new, innovative sales models.

Lots of talk about spend moving from print to the web, but at what point does that level off. In the reports you say we're ahead of the rest of Europe, so does that mean it levels off here first?

New Zenith numbers out today; what's your take on the drivers in the UK for next year?

WHO PARTICIPATED IN TYHE PWC/IAB research?

Here are a few of the companies who have been involved. It gives you a good sense of how large the market is, but remember that there are always some firms who don't participate. So the numbers in the data are the minimum, rather than the total.

Acxiom Ad2-one Adept Scientific Adlink Ad Revenue Advertising.com Adviva AOL Affiliate Window AskJeeves Associated New Media Autotrader BBC Bloomberg Blue Lithium BMJ Bolt Blue Bounty BSkyB Buy.at (Perfiliate) Channel 4 Chinwag Chrysalis Radio Classic FM CNet Condenast Confetti Dennis Interactive DGM Dixons Double Fusion E-circle Economist EDR EMAP E-Type Euroclick Everyclick Future Publishing Faversham House Group Financial Times Find.co.uk Findaproperty Fish4 Five Friends Reunited GCap Radio Google Guardian Habbo Hachette Fillpacchi Handbag Haymarket Hello Independent IPC Media IPT i-Points ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Johnston Press Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster MSN My Space National Magazines Net Communities Netrecruit News International Orange Overture Pigsback Property Finder Real Media Reed Business Information Reuters Right Move Scotland Online Sift SRH Skupe Teamtalk Telegraph Tesco Tiscali TMN Media Tradedoubler UK Net Guides UKTV Unanimis Upmystreet U Target Valueclick Viacom Brand Solutions Virgin Radio Wanadoo WME Workthing Yahoo! Yell
…Plus further recruitment sites, courtesy of WARC

NEED PERSPECTIVES FROM DIFFERENT MARKETS?

Thinking about the issues all this raises, here are a few comparisons about market growth and online adspend. They’re from articles or papers where I’ve tried to contextualise what is really happening (most recent first)…

US boom just keeps on coming
http://www.digitalstrategyconsulting.com/articles/2007/10/us_online_adspend_new_records.html

UK spend shows the transition between media
http://www.digitalstrategyconsulting.com/insight/2007/10/uk_digital_advertising_market.html

Mexico starts late but accelerates fast
http://www.digitalstrategyconsulting.com/articles/2007/07/mexico_hits_the_internet_tippi.html

Switzerland lags behind where it could be:
http://www.digitalstrategyconsulting.com/articles/2007/09/sizing_the_gap_swiss_marketers.html

Central & Eastern Europe rising quickly
http://www.digitalstrategyconsulting.com/insight/2007/05/digital_central_and_eastern.html

Spanish internet use and spend starts to accelerate
http://www.digitalstrategyconsulting.com/insight/2007/04/spain_understanding_the_online.html

Denmark: always out in front
http://www.digitalstrategyconsulting.com/articles/2005/01/danish_awards_put_internet_in.html

Some horridly wrong predictions in 2005 about where the market might be heading
http://www.digitalstrategyconsulting.com/insight/2005/04/digital_advertising_futures_th.html

The first attempt to track European online adspend for 2005
http://www.digitalstrategyconsulting.com/insight/2006/02/digital_europe_tracking_the.html

WHY IS THE UK AN INDICATOR MARKET?

Online started early in the UK, and it started in a country that had one of the highest home computing usage patterns in the world. Add to that the incredible saturation in the UK media markets (more than 15 national daily newspapers serving less than 60m people), the unique role of the BBC in raising the bar for quality in media, and a particularly savvy ad industry, and you had pretty much all of the right ingredients in place.

When I ran the UK online advertising trade association, I found myself digging around into the economic models of how the ad industry works. My hunch was that there were around 20 different drivers that were buoying up online marketing, but while in most media channels they all cancelled eachother out (some pulling up and some pulling down) in the UK they all pulled up, and early.

One driver was total adspend (high and innovative), another was the rise of broadband and the price of connections vs wages (very favourable if you include at-work access in the mid 90s), and another was the innovation in the ad industry (the UK’s always been ahead). Interestingly, after 96, another became the industry’s ability to organise and promote itself (the IAB succeeded in triggering growth and acting as a catalyst just the way we intended).

All of this is why the UK is horridly tough to work in, and why many other markets can simply look here and enjoy watching the laboratory rats figure out how to make the mistakes until they get it right.

When we were running some coaching in Switzerland this summer (high broadband, strong economy), it was interesting to see how, with just a few factors not present, the market just didn’t take off the same way (online adspend in Switzerland is closer to a third of the percentage level that goes into the UK market). There are some notes about it, here http://www.digitalstrategyconsulting.com/articles/2007/09/sizing_the_gap_swiss_marketers.html

This doesn’t mean that all countries follow the same path, but what we are expressing is the similarities we’ve seen between so many places. When you spot big differences in your market (like mobile in south Africa), maybe add in some comments here?

I'm on one of your Digital Training Academies and am curious about why you think the UK is worth everyone's attention. What makes it a lead market?

WHAT IS SPENT ON WEB CREATIVE?

Not enough. That’s the simple answer. Many brands still see the web as a ‘cheap’ (read ‘tatty’ or ‘second rate’) media channel. If as much was spent on the quality of their web creative as they spend in other channels, then the digital agencies would be stealing the show every time at Cannes and the web economy worldwide would be in even rosier health. So web marketing has got to where it is today by, in general, saving on the budgets rather enjoying the luxury of some channels.

So how much ‘exactly’ is spent? No one knows. Pretty much nowhere in the world is the production spend for the web accurately counted. Part of the problem lies in the definition of ‘advertising’ (is my next microsite for a campaign an ‘ad’, a ‘microsite’, or (cringe) an ‘IT’ investment?).

The next problem is the grey line over which portion goes on the web: if you’re sending the film crew off to South Africa to capture a car at sunset for the TV ad, and then using the film-stock online for your site, does that count as a web ad? What if half the views were on a portal, even if 80% of the media budget went on the TV? You can see the challenge.

When I helped set up the research for the UK online advertising market back in 1997, the aim was just to count the portion that was ‘media space’. That’s tricky enough, but it does mean that in the UK online advertising research that PricewaterhouseCoopers have been doing for over a decade, there’s an incredibly reliable dataset. From boom to bust and back again into the booming boom, the stats are as solid as you’ll find anywhere in the world.

…and that’s why the savvy market researchers will look at these and draw some conclusions about the growth in web production budgets and the spend they relate to. Email me if you need more on this..,

Lots of cash, but whats the creative budget: this should be getting TV spend behind it (our agency has a big web group, but lots of tele work)

INTERNATIONAL READERS: SPECIAL NOTE FOR READERS IN AFRICA, MIDDLE EAST AND CENTRAL & EASTERN EUROPE

Why is the UK data useful? If you're not in the UK does it matter? And why's it worth spending a few minutes looking at this?

>> This comment is just for participants on the Autumn Academies the Digital team are running outside Western Europe....

As Academy Managers we send you examples from the UK because it's a great laboratory for seeing what happens in the future. The web economy started much earlier in the Uk than elsewhere, but the online advertising economy in particular really accelerated early.

Many trends, such as the arrival of the rich media formats, the use of the Skyscraper format, the rise of Google, the trading model of CPM, and even some of the pressures on the prices of advertising - they all seem to be felt in the UK ahead of most other markets. Even the US now has a much lower percentage of total adspend going into the web than in the UK, and a lower percentage of search spend overall.

That's why this data is particularly interesting if you're a business strategist planning on where to put your resources over the next year.

It doesn't mean it's a certainty that your market and sector will follow the exact path - like most things in digital channels the evolution is unique to the country - but since our tutors started teaching online marketing, they've seen a consistent pattern, and that's one that you can really benefit from.

Don't be afraid to challenge us though: in South Africa where mobile handsets have had the edge since the start, in Russia where connections outside Moscow are still painfully slow, or in Japan where mobile internet has been big for five years, there are significantly different patterns within a broadly similar path. If you're attending one of our training sessions outside the UK, then maybe raise it in the classroom with your colleagues or with your tutor? The reports are intended to present an idea, get you thinking, and trigger a debate that will help build your intuition.

[Over & Out from the Academy Managers!]

GETTING THE NUMBERS TO ADD UP

The details of the methodology are in the full report, but the bottom line is that PWC carry out a survey of media owners. They talk with finance directors under a web of non-disclosure agreements and then get the details of the actual cash spent with the online sites. It’s really robust because it understates the market every time. I helped set up the project in 1997 (it was a real slog in the early years) and ran it until the start of 2005, so I’m pretty comfortable taking questions about methodology. It’s way more robust than most media in most countries, and because it’s based on the cash amounts you can be sure that the industry really is this large.

However, there are some notable exceptions:
- None of the spend on microsites is included
- Search engine optimization can’t be tracked, so that’s not in there
- Most affiliate spend is outside (though this can be a little grey)

As for the other media, that’s the methodology and the data that the Advertising Association publish through the guys at the WARC research centre. If you have more questions then post them here.

What's the methodology for calculating it? The numbers don't look comparable to other media.

GOOGLE FIGURES

Just to reconfirm, the data from PWC in the UK does include a revenue declaration from Google. It may not give all fo the details that some of the other media owners provide, but it does give an absolute robustness to the search engine marketing spend of 57% (of total online adspend)

Whether you're an ad agency, media owner, or brand marketer, there are a series of workshops we now run to translate these types of research findings into an action plan for your firm. They are run in-company for clients in the UK and Western Europe. Ask the team here at Digital for more if you're interested...