Internet advertising buoys the UK advertising industry with above-expectation 41.3% year on year growth in the first half of 2007

Above expectation growth takes the internet advertising sector to a half-year high of £1,334.3 million - compared to £917.2 million just a year ago - lifting online advertising's market share significantly, to 14.7%.

The results of the biannual internet advertising spend study commissioned by the Internet Advertising Bureau (IAB), the UK online advertising trade body, in association with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC), point to online advertising expenditure reaching a potential new high of £2.75 billion by the end of 2007.

The total UK advertising market grew by 3.1% during the first half of the year to £9.1 billion. However without online's contribution, UK media expenditure would have fallen by 1.9% (or £147 million). Once again the internet has propped up the UK advertising economy and remains the fastest-growing advertising medium. The new results see online overtake the size of the direct mail sector, which has a market share of 11.8%.

All major online ad formats surpass expectations

Classified advertising is the latest online success story, growing by 72% year on year to £277.7 million with a share of 20.8% of all internet advertising spend. Online classifieds in the recruitment, automotive and property sectors are shaking-up the print industry, with marketing budgets switching at a steady rate in response to the demands of the internet user.

Internet display advertising (including banners, skyscrapers and rich media formats) climbed 33% to £287 million and a share of 21.5%. Nine out of ten online households in the UK are now on broadband, and marketers in all sectors are targeting consumers with increasingly creative rich media and video advertisements.

Paid-for search (search engine listings that advertisers pay for when a consumer clicks through to their site) was 44% up year-on-year to £762.3 million - a share of 57.1% of the online total. Growth is attributed to at least half of all ecommerce transactions (£32 billion in 2006) starting with a search. In July 2007 internet users carried out 1.4 billion search queries and over 80% of these resulted in a click through to a website. Advertisers recognise that search plays a valuable role in building brands, selling products and creating a competitive advantage online.

Major categories up, automotive is star online performer

The top five categories remain the same as in 2006 but automotive has overtaken finance with a 12.5% share and is very much the star performer. From brand-building display ads for marques and models, to email building relationships, through to search aiding research and price comparison, and ultimately classifieds helping consumers find what they want, the automotive industry utilises every online format to complete a customer journey.

Recruitment leads with 24.7% of share up 5.3 points with finance down 3.9 points to 11.7%. Consumer goods made steady progress, increasing by 0.7 points to 5.3%, while retail remained static at around 3.1% of all online advertising spend.

The share of the business and industrial category more than doubled to 3.1% while telecoms also performed well - up two points to 6.7%. Property continued its ascendancy achieving a share of 5.7%, up 1.4 points year-on-year.

Key drivers for growth

Broadband: Broadband is now an everyday utility with 52% of all adults in Great Britain connected at home*, an increase from 13% of all adults with broadband just three years ago. With 90% of home internet users now accessing via broadband, up 6 points year on year, and 38% of the online population having used a wireless connection at home in the past month, advertisers are able to deliver far more creative and engaging communications to a mass audience.

Online evolution: Ofcom research reveals that average daily web use rose by 158% over the past four years; the over-50s account for nearly 30% of time spent online; and women in the critical 25 - 34 age group spend on average 20% more time on the net than their male counterparts. This is all great news for advertisers as the medium hurtles towards £2.75bn by the end of the year.

Social networking websites: While not a major driver of online advertising expenditure, social networking sites generate higher consumer demand for fast broadband, increasing time spent online and boosting overall consumer confidence in the online experience. This is likely to increase advertiser interest in the medium and lead to a continued growth in advertising expenditure for years to come.

Measurement and web analytics: As tools for measuring the efficacy of online, such as engagement and brand-building, become more sophisticated and robust the sector is fast becoming more accountable, transparent and measurable than traditional advertising sectors.

The online market is developing at an astounding rate and once again we see exceptional growth and a significant increase in market share. 90% of internet users are on broadband now and nearly 40% are using wireless. We're also seeing women and the over 50s spending far more time online, which makes the internet a very attractive medium to a broader set of advertisers.

Importantly, marketers have a much better understanding of how online works and how to measure the effects of brand advertising as well as direct response. With other disciplines such as web TV, mobile and in-game advertising on the rise too, the opportunities in digital are limitless.

Source: Internet Advertising Bureau UK.