Summary
Online ad spend has had an encouraging 2009 buoyed by increases in certain ad formats. But it is as much about the TV ad sector performing less well, particularly in the face of competition from online video advertising, which is a sector worth watching in the future.
Analysis
It is important not to get too carried away by the figures published in the report from the Internet Advertising Bureau (IAB), Price Waterhouse Coopers (PWC) and World Advertising Research Centre (WARC).
Ad spend online actually fell 5.2 per cent year on year - but this was less than many commentators had forecasted. And while the entire advertising sector fell 16.6 per cent year on year, it would seem that the less dynamic performance of the TV market (which saw spot advertising decline by 16.1% in the first half of 2009) was as much a contributory factor to online ad spend overtaking it.
So what has boosted online ad spend in the first half of 2009 by 4.6 per cent (a value of £82m)?
Search remains a dominating factor in the UK, more so than in other countries (including the US), according to figures issued by eMarketer in June 2009. They valued search at 59.3 per cent of the total UK online advertising spend in 2008 and predicted that that would rise further in 2009. This seems to be borne out by the IAB/PWC figures, which has search now running at 59,9 per cent of the total share for the first half of 2009, valued at £1.048bn.
That is slightly surprising since the average cost per click has fallen by more than 25 percent year on year for providers such as Google Search and Yahoo Search and even as much as 70 per cent for Microsoft Live Search (according to figures from Efficient Frontiers, April 2009)
But that is not the only factor. Online classifieds have also performed well and are up 10.6 per cent in this period, valued at £385.1m, according to IAB/PWC.
Where the two sectors go head to head is in video advertising. Online video has been growing year on year by a massive 195% as adverts have become more accepted by UK audiences and cheaper, faster broadband connections have improved viewing. Plus, online video has a higher click-through rate than other forms of online advertising (according to figures released by AdTech in March 2009), the UK recording an average of 1.75% for Q4 2008.
This makes online video very attractive for ad agencies to sell into their clients because not only is response measurable but there is clear evidence it is more effective than other online formats. And while it continues to offer the ability for brands to reach their consumers in a more targeted and cost-effective manner, then this sector will remain buoyant.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
