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Online advertising spend grew 4.6% to £1.75bn in the first half of the year, giving it a record 23.5% market share – overtaking TV to become the UK’s biggest advertising medium.

The figures, from the annual online advertising expenditure report from the Internet Advertising Bureau (IAB), PricewaterhouseCoopers (PWC) and the World Advertising Research Centre (WARC), are a milestone for the UK online industry, which remains the global leader in terms of market share for online.

Online ad spend was £82m higher in the first half of 2009 compared to the same period in 2008, despite a decrease in the overall advertising sector, which plunged 16.6% during the same period.

The increase was driven by search, which makes up 59.9% of all online ad spend, as well as online classifieds, which outperformed expectations by growing 10.6% despite the recession’s impact on the property, automotive and recruitment sectors.

Online display dropped 5.2% year on year - a better figure than forecast as it was softened by the booming online video market, where spend grew 195%.

Guy Phillipson, IAB CEO, called the results a “milestone of worldwide significance”. “The entire ad market is down 16.6% and some sectors have been hit very hard,” he said. “We’ve been through an awful recession and advertising has taken a huge hit, so for online to be up by 4.6% is amazing.”

Eva Berg-Winters, assistant director of PWC, said the sector had outperformed expectations after a “very tough” first quarter. “We didn’t expect online advertising to be growing; Q1 had been really difficult and we expected zero or below.”

The growth in online market share to 23.5% puts the sector ahead of TV, where ad spend in H1 2009 was £1.6bn, a 21.9% market share, according to figures from WARC.

It comes a year ahead of forecasts, which widely predicted the sector would eclipse TV in 2010, but was no surprise to brand marketers.

Mark Cross, communications planning director at the COI, said the growth in spend and share reflected broader market shifts. The COI’s digital investment grew 84% to £40m in the year to March 2009.

“Digital is increasingly embedded across everything we do. Our use of it is becoming wider and deeper, which is leading to an increased share in spend. It’s not about either/or, it’s about how everything fits together. All our communications have digital in; the extent to which this is turned up and down varies by campaign.”

David Fulton, chief marketing officer and group brand director at Vodafone, said, “Over the last three years our spend has gone from 5% to 20% in digital. We believe in employing the full media mix and to do that you have to invest in each.”

But he said the continuing shift of audiences online meant Vodafone’s digital spend could follow the overall market trend and overtake TV.

“If you look at all the audience trends, it’s possible it will happen because the available programmes aren’t delivering mass audiences regularly enough, so TV is turning into a long-tail medium,” Fulton said. “If you’re selling digital ads, you have it easier than if you’re selling TV.”

Hoil Chun, Samsung’s global marketing manager, said, “The internet is at the centre of our strategy because it’s a digital world. We’re putting more effort, resources and money into it now than ever.”

But Lindsey Clay, marketing director of TV marketing body Thinkbox, said, “The internet is a fantastic technology and home to many different marketing activities that do different things. As such it’s interesting but meaningless to sweep all the money spent on every aspect of online marketing into one big figure and celebrate it.”

Berg-Winters said she expects online will continue to grow throughout the year but predicts the TV market could see a resurgence as the market recovers in 2010. But predicted, “TV might have a slight bounce back next year. But as the overall economy grows, so will online.”

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Published 1 October, 2009 by NMA Staff

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