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Digital Intelligence
The monthly review of new research and developments in digital marketing

October 2007

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Digital Strategy Consulting


Another cracking month for the internet sector and we held back this round-up of September research to include the two new records set for online adspend in the UK and the US.

Online is taking almost 15% of the adspend cake in the UK and crossed $5bn in a single quarter in the US. The tide of migration to free content is pulling hard and this month we look at how the New York Times, the FT and probably the Wall St. Journal are all getting seduced again to ad funded models; questioning the role of subscription barriers that block audience growth. In our sector focus there's more on the music industry as the Charlatans give away their latest CD and Radiohead let you chose how much their music is worth.


Danny Meadows-Klue
Founder and Chief Executive
Digital Strategy Consulting

Advertising

US online adspend: new records set as net breaks $5bn a quarter

The latest numbers for the US from PricewaterhouseCoopers (PwC) and the IAB confirm that the world's largest online ad market is still enjoying the largest annual growth in real terms. Spend surged ahead by 25.4%, crossing the $5bn (£2.46bn) mark in a single quarter.
US Internet advertising revenues for the first six months of 2007 were nearly $10bn (£4.92), setting yet another new record and were almost 27% up on the first half of 2006. Spend reached nearly $5.1bn (£2.50bn) in the second quarter of 2007.
The growth was propelled not just by search engines (which increased their share of online adspend to 41%) but also by the wider consumer advertising sector. Classifieds continued to swell, but they did lose share within online to the Rich Media and Video formats which now account for 8% of all online advertising.
Read more analysis of these figures: www.digitalstrategyconsulting.com.

IAB US: http://www.iab.net, 05/10/2007

Source: IAB US, PricewaterhouseCoopers 2007
IAB US: http://www.iab.net

UK online ad spend: biggest leap yet
Today's new figures confirm the switch to online continues to accelerate 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, 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 forecast, online ad spend growth held steady at above 40% year on year, giving the largest quarters and rises in the history of the medium, and forcing the TV and magazine industry into panic, issuing statements in defence of classic channels.

  • 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: 14.7%

With the UK market acting as a key indicator for European online adspend behaviour, the results will boost stock prices for Continental firms looking for models of their own country's digital economy several years down the line. The research is particularly accurate because it relies on publisher revenue declarations (under non-disclosure agreements to PricewaterhouseCoopers), and is one of the only markets in the world to include a revenue declaration from Google.

Classifieds set to beat display:

  • Online classified advertising: up 72% year-on-year
  • Market value for period: £277.7m
  • Market share within online: 20.8%
  • Online display advertising: up 33% year-on-year
  • Market value for period: £287m
  • Market share within online: 21.5%

For further analysis from Digital on these results go to http://www.digitalstrategyconsulting.com.

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Companies

24/7 Real Media launch customer re-targeting tool

24/7 Real Media have launched a new tool which allows advertisers to target potential customers with personalised display ads, writes Netimperative. The new Search Re-Targeting service serves users who click on search engine text ads with customised display advertising on any website in the Global Web Alliance network. Display ads can be modified in relation to the original keyword a user searched for and can also relate to the purchase stage reached by a user. The system can be used for example to keep potential customers interested in potential purchases by offering discounts a month after an original search had been made. Foreign currency firm Interchange FX have carried out the first live UK trial of the system, by comparing two identical display ad campaigns. The campaign with Search Re-targeting enabled saw click-through rates increase eight times.
24/7 Real Media's Global Web Alliance network includes over 950 sites and serves ads to 121m unique users worldwide.
From Netimperative: http://www.netimperative.com, 14/09/2007
24/7 Real Media:
www.247realmedia.com

Google launches mobile ad platform
Google has added another string to its bow with the launch of AdSense for Mobile, writes Telecoms.com. The platform places targeted text adverts on publishers' mobile websites.
Google is increasingly looking at the mobile space: the firm's CEO Eric Schmidt said last year that he believes that mobile phone calls should be paid for through advertising.
From Telecoms.com: http://www.telecoms.com, 18/09/2007
Google: http://www.google.com

Blyk offers free calls in exchange for advertising
Ad-funded mobile network Blyk has launched in the UK, writes Netimperative. The network is an invitation-online mobile virtual network operator aimed at 16-24 year olds. Users are profiled during registration and by ongoing SMS polling to help brands target more effectively. Users receive up to 6 brand picture messages per day and in exchange receive 217 free texts and 43 free minutes per month.
From Netimperative: http://www.netimperative.com, 25/09/2007
Blyk:
http://www.blyk.co.uk

Facebook overtakes MySpace to become UK's most popular social network
According to new data from Nielsen//NetRatings Facebook overtook MySpace in August 2007 in terms of unique visitors, writes Brand Republic. Facebook received 6.5m visitors during the month against 6.4m for MySpace. Facebook's audience has increased by 541% since December 2006 compared to growth at MySpace of 20%. Facebook is also the most popular social network in terms of total time spent visiting the site with 991m minutes, ahead of Bebo (600m minutes) and MySpace (540m minutes). Worldwide Facebook now has 42m members, with 5m based in the UK. The site attracts 200,000 new members per day.
The rapid success of Facebook has led to a number of offers for the firm, although the site's co-founder and chief executive Mark Zuckerberg has said that he wants Facebook to remain independent. Microsoft, which already delivers ads on the site, is said to be in talks about acquiring a 5% stake for up to $500m
(£246m), valuing the site at around $10bn (£4.92bn).
From Brand Republic: http://www.brandrepublic.com, 25/09/2007
Facebook: http://www.facebook.com

Most popular social networks in the UK - August 2007 - and growth across 2007

E.g. In August 2007, 6.5 million Britons (20% of all active Britons online) visited Facebook; 541% more than did so in December 2006

Source: Nielsen/NetRatings
Nielsen/NetRatings: http://www.nielsen-netratings.com

Fastest growing social networks* in the UK across 2007

*Minimum requirement of 125,000 Unique Visitors in August 2007.
**PerfSpot had no recorded figures until April 2007
E.g. Facebook's audience grew 541% from 1 million in December 2006 to 6.5 million in August 2007

Source: Nielsen/NetRatings
Nielsen/NetRatings: http://www.nielsen-netratings.com

Most engaging social networks by total time - August 2007

E.g. Britons spent 991 million minutes in total on the Facebook. The average visitor to Second Life spent 5 hours 29 minutes there during August 2007

Source: Nielsen/NetRatings
Nielsen/NetRatings: http://www.nielsen-netratings.com

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Trends

Brits continue to spend more time online

New data from Point Topic shows that the British are staying online for longer, writes ENN. 86.6% of home internet users now spend at least 6 hours online each week, up from 83% at the end of last year (and 50% at the end of 2005). Amazingly 5% of those polled claim to spend over 80 hours a week online. According to the research 90% of broadband users go online to use e-mail and 60% to use auction sites such as eBay. In addition 40% of broadband users also download music, with 16% going online to watch TV or streaming video. 70% of all respondents also shop online (from 65% in 2006).
From ENN: http://www.electricnews.net, 27/09/2007
Point Topic:
http://www.point-topic.com
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Industry focus: Content goes free

Our special focus this month examines how both the newspaper and music sectors have both made moves away from strict subscription models towards other income-generating strategies. For the most part, online consumers remain unconvinced by attempts to make them pay for content online. The very nature of the internet and its global explosion during the last decade has meant that users could normally find what they wanted for free elsewhere with only a few clicks of a mouse. Studios, record labels and publishers have been among those groups who have resisted this change but a number of stories this month suggest that content producers have finally realised that they can't keep their heads in the sand indefinitely. The internet has irrevocably changed the relationship between media providers and consumers. However it has also created an unlimited supply of niche markets and the fastest growing advertising sector of the past decade.

New York Times abandons subscriptions
The New York Times has stopped charging users for content on its NYTimes.com website, writes Netimperative. The paper launched its paid service two years ago and charged $7.95/month (£4) or $49.95/year (£20) for access to its news and columns online. Senior vice-president and general manager of the website Vivian Schiller explained the move: "Since we launched TimesSelect in 2005, the online landscape has altered significantly. Readers increasingly find news through search, as well as through social networks, blogs and other online sources." The paper has identified the "greater potential for revenue from online advertising" and some sections of the site will have sponsorship placements. Under the new strategy archives from 1851-1922 and from 1986-present will be completely free with only archive content from between 1923 and 1986 continuing to be charged for.
From Netimperative: http://www.netimperative.com, 18/09/2007
NYTimes.com: www.nytimes.com

FT.com opens up content for free
The Financial Times's FT.com website is to start letting users access stories for free, writes Netimperative. Under the new charging model users will be able to access 30 free article per month before being asked to subscribe. The new system will make it possible for bloggers and news aggregators to link directly to FT.com content. The change in charging strategy coincides with a major site overhaul which will include new blogs, a new markets section and increased editorial content. Standard and premium subscription will cost £99 and £199 respectively.
From Netimperative: http://www.netimperative.com, 01/10/2007
FT.com: http://www.ft.com

Murdoch plans to make Wall Street Journal free
Rupert Murdoch has declared he is interested in removing the $99 (£49) subscription charge from the Wall Street Journal's wsj.com website, writes Brand Republic. "It would be an expensive thing to do in the short term. In the long term, it may be a great thing to do," said Murdoch addressing the Goldman Sachs Communacopia conference. WSJ.com currently has 983,000 subscribers. Murdoch's $5bn (£2.5bn) acquisition of Wall Street Journal parent company Dow Jones should be completed by November.
From Brand Republic: http://www.brandrepublic.com, 19/09/2007
WSJ.com: http://www.wsj.com

Radiohead let fans decide cost of new album
Radiohead have released their latest album directly through their website and are letting fans decide how much they want to pay for it, writes Brand Republic. Technically fans can pay nothing for the 10-song album "In Rainbows" though they are still required to cover the 45p credit card fee. Radiohead are currently out of contract, giving them the freedom to release their music on their own terms. Fans can also buy a deluxe £40 "discbox" box set through the website which includes CD and vinyl copies of the album, a second CD and a lyric book.
From Brand Republic: http://www.brandrepublic.com, 02/10/2007
Radiohead - In Rainbows: http://www.inrainbows.com

Charlatans release music for free through Xfm
The Charlatans are to release their next album for free through the Xfm website, writes Brand Republic. The album should be ready in early 2008, though in the interim the band are releasing their new single "You Cross My Path" through the site on 22nd October. The Charlatans are now backed by Alan McGee who now believes that CD sales are incidental. He said: "The band will get paid by more people coming to gigs, buying merchandise, publishing and synch fees. I believe it's the future business model."
Prince also gave his last album away for free through the Mail on Sunday last July prior to his 21 night residency in London.
From Brand Republic: http://www.brandrepublic.com, 01/10/2007
Xfm: http://www.xfm.co.uk

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Mobile

Mobile ad spending to grow 120% during the next year

The latest Jack Myers Media Business Report forecasts that global mobile advertising will grow 120% during 2008 to reach $1.1bn (from $500m - £246m), writes ClickZ. The report expects similar growth during 2009 making the mobile ad market worth $2.4bn (£1.18bn) - roughly 1% of total global adspend. Online advertising, according to the report, will grow 20% during 2007, reaching $16.7bn (£8.21bn). This is forecast to rise a further 24% in 2008 and 28.5% in 2009.
From ClickZ: http://www.clickz.com, 18/09/2007
Jack Myers Media Village:
www.mediavillage.com
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Statistics

Monthly internet usage statistics for Germany, October 2007

Source: Nielsen/NetRatings Home/Work Panel monthly statistics
Nielsen/NetRatings: http://www.nielsen-netratings.com

Monthly top ten German parent companies for October 2007

Source: Nielsen/NetRatings Home/Work Panel monthly statistics
Nielsen/NetRatings: http://www.nielsen-netratings.com

Top 10 popular websites in the UK, August 2007

This list features the most popular websites based on UK Internet usage for August 2007, ranked by market share of visits across all Hitwise industries. Source: Hitwise Datacentre, August 2007, based on market share of visits
Hitwise: http://www.hitwise.co.uk/datacenter

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