Summary
Research from the IAB as well as PricewaterhouseCoopers and the World Advertising Research Center has found that Internet advertising spending has surpassed that of television advertising. This is primarily due to the relative weakness of ad-supported television in the U.K. market and does not directly translate to the U.S. and other markets in the Americas and AsiaPac regions.
Analysis
In many markets, consumers are spending equal amounts of time watching television and interacting with Internet media. By the rough measure of time spent it is easy to infer that Internet ad spending should roughly equal that of television.
However, in the U.S., Internet advertising revenues are less than half those of television. Though U.S. Internet advertising revenues have reached parity with Internet access subscription revenues. Furthermore, when it comes to video media, in comparison to broadcast and Pay TV (cable, satellite and TelcoTV) platforms, Internet audiences are a very small percentage of overall viewing.
So the question about the U.K. market is why it's so different. These results would be akin to Internet advertising revenues exceeding $80 billion in the U.S. -- when the results (as reported by the IAB) were actually $23.4 billion in 2008.
Is there higher Internet usage in the U.K.? Or is there some other reason for this phenomenon?
The answer is actually quite simple. It's the BBC. Or, more appropriately, the strong role of public broadcasters in the U.K.
According to Ofcom (the British telecoms regulator), commercial broadcaster ITV1 leads peak hour programming, followed by BBC One -- thereby taking substantial amounts of television advertising inventory off the market. In other words, the British television advertising market is naturally smaller (as a percentage of GDP and on a per capita basis) than markets where public broadcasters play a far less substantial role.
Furthermore, overall ad spending in the U.K. is lower than other G20 countries, at 0.95% of GDP. This is higher than Germany, France and China; but lower than the U.S. (1.26%), Russia (1.04%), and Australia (1.11%).
The British spend less on advertising than other countries/markets. Television advertising is a smaller market due to the strong presence of the public broadcaster. And Internet advertising is the only advertising market that is free of these outside influences -- as a result, it is growing and has now exceeded television advertising in annual spending.
Don't expect this to translate directly to other markets. The key take-away from this market growth (which was forecast to happen in 2009 by several media planning agencies) is that Internet advertising is less susceptible to the regulatory and ownership requirements that have limited media companies selling television advertising.
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.
