The figures reveal that display advertising increased by 67.7% to £162.1 million, while paid-for search experienced 72% growth to £197.3 million. Classifieds also increased by 93.1% year-on-year to £131.4 million.
The figures reflect a surge in expenditure by existing and new advertisers confident the internet is a fast maturing, brand building and direct response medium.
The acceleration of expenditure on internet advertising was largely fuelled by the increase in broadband-connected consumers, heralding a new era of sophisticated display ad formats. At the same time, paid-for search continues to benefit as the majority of the internet audience uses search as the starting point for their online sessions.
Online now bigger than outdoor
Total online advertising revenues for the period reached £490.8 million, a market share of 5.8%. The sector is now bigger than outdoor, which had a market share of 5.1% for the same period in 2005, while radio stood at 3.6%.
All ad formats see healthy increases while rich media grows
Search, display and classifieds saw a significant increase in ad spend, with consistent growth across all formats. Display advertising increased 67.7% year on year to £162.1m or 33% of all online advertising.
One big growth area was ‘other display’, which includes video streaming and microsites – this is now around ten times the size of the same period last year. Although this is still a relatively small sector, use of these formats is set to increase as the IAB continues to educate advertisers on the opportunities available for sophisticated and engaging online marketing communications. Tenancies (where advertisers also provide site content e.g. the dating or travel sections within a portal) also saw a substantial increase of 381%, totaling £27.5m for the first half of 2005.
Search is a gateway to increased spend
Paid-for search increased 72.8% year on year to £197.3m (40.2% of all ad spend) as marketers continue to test search as a ‘gateway’ to internet advertising. This is due in part to marketers following their competitors online through search advertising, because of its proven return on investment.
Classifieds increased 93.1% year on year to £131.4m, representing 26.8% of online advertising expenditure. This growth was driven mainly by the recruitment and automotive sectors, which continue to allocate a large share of their budgets to online.
Top five sectors continue to advertise online
The internet is showing signs of real maturity as the top sectors continue to experienceattractive returns on investment. Recruitment saw the biggest increase in real terms as the highest spending sector with an 80% increase to £96.6m for the first half of the year.
The finance, travel and transport and automotive sectors also dedicated a sizeable amount of their budgets to marketing online (see table below).
Technology was the biggest mover with a year-on-year increase of 132.6%, largely driven by the computing sector. Advertisers are recognising that consumers use the internet to research, price compare and purchase, so benefit from the power of online as a direct response medium.
Consumer goods were up 35.9% to £23.6m, to represent 4.8% of all online ad spend. Within this category FMCGs saw a promising increase of 39.1% as some of the UK’s biggest advertisers set their sights on the internet as a brand-building medium through the use of display ads, achieving greater interactivity and dwell-time with their consumers.
This wave of results saw the introduction of telecoms as a stand alone with a spend of £19.5m. The most surprising increase was gardening and agriculture, which flourished with 797.6% growth compared to the first half of 2004. This emphasises the ways in which advertisers are using the internet to reach niche and specific target audiences.
|Sector||Spend (£m)||Year-on-year growth (%)|
Guy Phillipson, chief executive of the IAB, said: Advertisers know consumers use the internet to research, compare and purchase. Consequently, brand building display ads and paid-for search products have all shown dramatic increases, firmly establishing the internet as a major advertising medium.
The top five sectors continue to reap attractive returns on investment and are increasing their budgets as online competition hots up. However, the IAB remains dedicated to converting those within the marketing community who have not yet recognised the full potential of the internet. FMCG advertisers are increasing their ad spend, but there is still much more to do.
Key Drivers for the first half of 2005
Broadband: Broadband take-up has more than doubled in the past twelve months with over eight million homes now connected – outstripping dial-up. Competitive pricing and increased connection speeds fed demand, putting the UK ahead of the USA in terms of percentage of households with broadband. Furthermore, advertisers are increasing their investment in internet advertising as broadband users spend more time – and more money – online.
Engaging creativity: Innovation in internet advertising technology has facilitated more creative opportunities. As marketers seek to engage with customers they are championing developments such as video streaming, personalisation, interactive formats and localised search to extend brand conversations.
Media consumption: People are increasingly selective with the media they consume and the brand messages they notice. Advertisers are seeking to engage with customers on their terms, building relationships through permission rather than intrusion. Online advertising is particularly effective at engaging audiences, and marketers are starting to understand the dynamics of the medium.
Online retail boom: Last Christmas was a great success for online retailers. Retail association IMRG predicts that online sales will reach £19.6 billion in 2005. Retailers and manufacturers are steadily investing more online in order to get closer to the point of purchase, influencing what people buy and where they buy it.
About the research
The main data source is a survey of media owners carried out for the IAB by PricewaterhouseCoopers and measures the industry based on recorded revenues reported by the finance departments of online media owners. It is the authoritative financial source for the size of the UK market and has always been used as the definitive source by the ad industry.
About the Internet Advertising Bureau (IAB)
IAB UK is the trade association for online advertising. As a not for profit organisation its chief objective is to help advertisers make the most of the internet to increase their turnover and grow their brands. IAB UK is part of an international network of 25 IABs and was established in 1996 when it created the banner ad format. In the UK there are more than 180 members representing more than 2000 UK websites. The organisation is run by the UK’s leading digital and traditional media owners.
PricewaterhouseCoopers (www.pwc.com/uk) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 144 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. Unless otherwise indicated, PricewaterhouseCoopers refers to PricewaterhouseCoopers LLP a limited liability partnership incorporated in England. PricewaterhouseCoopers LLP is a member firm of PricewaterhouseCoopers International Limited.
For the full report visit www.iabuk.net
This article was first published on brandrepublic.com