welcome richard eyre, chairman, iab guy phillipson, chief executive, iab laurence bird, head of...

WelcomeRichard Eyre, Chairman, IABGuy Phillipson, Chief Executive, IABLaurence Bird, Head of Planning & Research, IABPaul Pilkington, Director, Entertainment and Media Practice, PwC

UK Online Adspend Study Results for the full year 2006

Prepared by PricewaterhouseCoopers for the IAB

Background

• Census of all major UK online media owners

• Official Advertising Association figures since 1997

• Information collected each half year

• Analysis available by

• Format

• Industry category

Agenda

• Study methodology• Market background and trends• UK online adspend – headline results• Online in context• The digital media mix• Industry categories• In summary• Questions & answers

Methodology

A brief history…• The IAB has been working with PWC since 1997 to survey the value of

the online advertising market.• We have run projects in Europe and North America to assess the size

of the interactive media markets.• These figures have become the industry standard for measuring

advertising spend and in the UK are now used by the Advertising Association.

• 102 companies have participated in the survey representing thousands of websites.

• Reported figures are not adjusted to account for other organisations that have not participated.

• Total advertising revenue is reported on a gross basis.

• The figures are drawn up on the basis of site declaration. They cover thousands of UK websites, but by no means all.

Research participantsAcxiom Ad2-one Adept Scientific Adlink Advertising.com Adviva AOL Affiliate Window AskJeeves Associated New Media Autotrader BBC Blue Lithium BMJ Bolt Blue Bounty BSkyB Channel 4 Chinwag Chrysalis Radio Classic FM CNet Condenast Confetti Dennis Interactive DGM Dixons E-circle Economist EDR

EMAP E-Type Euroclick Everyclick Future Publishing Faversham House Group Financial Times Find.co.uk Findaproperty Fish4 Five Friends Reunited GCap Radio Google Guardian Habbo Hachette Fillpacchi Handbag Haymarket IPC

Media IPT i-Points ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster

MSN My Space National Magazines Net Communities Netrecruit News International Orange Overture Property Finder Real Media Reed Business Information Reuters Right Move Scotland Online Sift SRH Skupe Teamtalk

Telegraph Tesco Tiscali TMN Media Tradedoubler UK Net Guides Unanimis Upmystreet U Target Valueclick Viacom Brand Solutions Virgin Radio Wanadoo

WME Workthing Yahoo! Yell…Plus further recruitment sites, courtesy of WARC

Representing thousands of UK websites

Market Background

4.66.2

7.28.7

10.712.7

14.2

17.519.1

21.1 22.023.6 24.0 24.6 25.1

27.228.1

29.3 29.830.9

Millions of people

Online audience growing steadily

Dec1996

Dec1997

Dec1998

Dec1999

June 1997

June 1998

June 1999

June 2000

Dec 2000

June 2001

Dec 2001

June 2002

Dec 2002

June 2003

Dec 2003

June 2004

Dec 2004

June2005

Dec2005

Jun2006

Source: Gfk NOP World, To June 2006

89%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Per

cent

age

of h

ome

user

s

Source: BMRB Internet Monitor, Q4 2005 Base: All who have used the Internet at home on a computer in the last month

Broadband access at home

Faster and more convenient broadband access is changing the way the internet is used

57%

37%

38%

36% 27%

5%

0% 20% 40% 60% 80% 100%

Nov. 05

Nov. 06

< 2MB2 MB>2 MB

Base: All broadband users who knew their speed of connection (443)Source: BMRB Internet Monitor Nov 2006

A third have used wireless broadband in the last month

Q. What is the connection speed of your home broadband?

Online second only to TV% of media time for all internet users

7 6

25

27

34

47

17

24

47

TV

Internet

Radio

Newspapers

Magazines

8

23

48

5

16

Weekdays

Saturdays Sundays

Source: BMRB Internet Monitor, Nov 2006 Base: All Internet users aged 15+

Recent headlines

The biggest online Christmas

Plea to agencies

It warns agencies they will no longer be competing solely among themselves, adding ‘Allies may become competitors, advertisers may become suppliers and agencies may become media owners’

They suggest it is time to ditch the traditional description of ‘above the line’ and ‘direct’ for broader definitions such as ‘not-named’ for the former and ‘names’ or ‘personalised’ for the latter

This time last year…

• Online achieved 60% growth to reach 1.4bn for 2005

• We predicted breaking the £2bn barrier by end of 2006…

• But this would mean an increase of 600m – more than the size of radio in itself.

• We also said overtaking National Press was a real possibility

2B or not 2B

That is the question

£2,015.8bn

market in 2006

An increase of £649m year-on-year

41.2% increaseOn a like for like basis

New contributions in 2006 represented £86.4m

2006 vs. 2005

47.4 42.8 36.6 38.9 36.6 45.2 51.1 63.888.0

385.5

105.2

152.1 171.8

224.1

327.0350.5

514.9

303.5

119.7

456.0461.2

583.7

174.6

254.6

0

100

200

300

400

500

600

700

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Online advertising nearly £600m in Q4£

mill

ions

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

‘01 ‘03‘02 ‘04 ‘05 ‘06

Online in context…

Breaking market trends in the UK ad industry

22.2%

20.8%

16.2%

13.2%

5.3% 3.3% 0.9%

6.7%

TVPress DisplayPress ClassifiedDMInternetDirectoriesOutdoorRadioCinema

Internet 11.4%

Market share over 11%Full year 2006

Total advertisingmarket

£17.6bn

Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

-7.8%-5.2%

-0.8%

4.0%

41.2%

-2.0%-2.1%-4.7%

PressClassified

Radio TV Direct Mail Cinema PressDisplay

Outdoor Internet

Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / Radio Advertising Bureau/ WARC

Online drives the whole marketYear on year growth for 2006

Total advertising market growth = 1.1%

Mar

ket

Sha

reOnline’s share growth accelerates

Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

2.5%3.3%

4.2%

5.5%

7.3%8.4%

10.4%

12.4%

H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006

21.8%

20.9%

15.2%

13.4%

5.5%3.2% 0.9%

6.7%

TVPress DisplayPress ClassifiedDMInternetDirectoriesOutdoorRadioCinema

Internet 12.4%

Second half market share hits 12.4%A new world record

Total advertisingmarket – H2 06

£8.8bn


Largest share Anywhere

in the world

0

200

400

600

800

1000

1200

Q198

Q298

Q398

Q498

Q199

Q299

Q399

Q499

Q100

Q200

Q300

Q400

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Radio

Outdoor

Internet

Press -Classified

Direct Mail

Press - Display

Television

Online’s strong progress continues

£ m

illio

ns

Source: PricewaterhouseCoopers / Internet Advertising Bureau / Advertising Association / Radio Advertising Bureau / WARCN.B. WARC Recruitment data included from 2003

Radio

Outdoor

Internet

Press - Classified

Direct Mail

Press - Display

Television

Online overtakes National PressFull year 2006

152.9

581.7812.4 932.5 1,015.8

1,176.2

1,919.8 2,015.82,321.8

3,670.53,904.6

2,782.62,860.1

Cinem

a

Radio

Consu

mer

Mag

azin

es

Outdo

or

Busine

ss M

agaz

ines

Direct

ories

Nation

al N

ewsp

aper

s

Inte

rnet

Direct

Mail

Regio

nal N

ewsp

aper

s

Press

Clas

sifie

d Tot

al

Press

Disp

lay T

otal TV

£m


Summary – Full year 2006

• Online advertising driving growth of the entire media market

• Internet advertising breaks the £2bn barrier in 2006 to reach £2,015.8m

• Online achieved a share of 11.4%, up almost 4 points from 2005 (7.8%)

• The market grew 41.2% year-on-year, maintaining the strong growth of previous waves

Summary – H2 2006

• In the second half of the year, online advertising was worth £1,098.6m

• The internet’s share of all advertising expenditure actually reached 12.4%

• Revenues for Q4 nearly £600m – 10 times the size of Q4 2002

The digital media mix

The developing mix of ad products

The digital media mix% share of revenues for the full year 2006

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARCIAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures.

22.5%

18.8%57.8%

0.9%

DisplayClassifiedsPaid for searchSolus

Full year total –£2,015.8m

The digital media mixAll groups of formats have experienced strong growth

335.9262.2

768.3

453.7379.0

1165.6

Display Classifieds Paid for search

2005 2006

£ m

illio

ns

+35%+45%

+52%


The digital media mix% share of revenues for 2006

16.0% 1.0%

0.7%

3.6%

0.8%

0.5%

0.9%

10.7%

6.6%

1.5%

57.8%

Banners / Embedded

Sponsorships

Interruptive formats

Tenancies

Other display

Display ads on email

Solus Email

Recruiment classifieds

Other consumer classif.

B2B Classified

Paid-for search listings


£321.5m

£20.1m

£14.0m

£73.2

£15.8

£9.1

£17.5m

£ 215.2m

£133.2m

£30.6m

£1,165.6m

The digital media mixYear-on-Year Comparison

£ m

illio

ns

Source: PricewaterhouseCoopers / WARC recruitment classifieds / Internet Advertising BureauIAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures.

8.89.1

14.0

15.8

17.5

20.1

30.6

73.2

133.2

215.2

321.5

1,165.6

20.5

15.7

10.9

55.6

80.3

182.0

224.4

768.3

Display ads on email

Interruptive formats

Other display

Solus email

Sponsorships

B2B classified

Tenancies

Other consumer classifieds

Recruitment classifieds

Banners / Embedded

Paid-for search listings

20062005

Strong growth of search continues

181.2

248.5

337.0

431.4

531.3

634.3

H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006

£m

Source: Internet Advertising Bureau / PricewaterhouseCoopers

Search is the gateway to brands

• People use search as a stepping stone to find the advertiser’s brand site

• More than 8 out of 10 users rely on a search engine after partially remembering a website address

• At least half of all e-commerce transactions (£30bn in 2006) begin with a search

• Search is now a £1.1bn mediumSource: Yahoo! Search Marketing, ISOBAR, UDA research 2005; Google

Continued growth in further classified

53.8 67.494.4 87.6 102.8 112.314.3

26.0

37.0 43.3

58.774.5

29.9

0.7

0

50

100

150

200

250

H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006

Recruiment classifieds Other consumer classifieds B2B classifieds

£m


Display: breadth of formats

73.291.4 105.4 119.0

138.9

182.7

237.9

215.9

173.8162.1

136.2

96.7

0

50

100

150

200

250

H1 2004 H2 2004 H1 2005 H2 2005 H1 2006 H2 2006

Banners / Embedded Sponsorships Interruptive formats

Display ads on email Tenancies Other display

£m


Formats summary – 2006• Revenues increased across all formats, except for

sponsorships and interruptive formats (pop-ups)

• With revenues of £1,165.6m, search maintained its dominant position

• YoY, display was up 35% to £454m while search increased by 52% and classifieds grew by 45% to £379m

• Classifieds: recruitment increased by 18% to £215m and other classifieds grew by 67% to £133m

Industry categories


Recruitment sector continues to lead the market in the second half of 2006

0.3%

0.6%

0.9%

1.0%

1.2%

3.3%

4.4%

4.6%

5.3%

5.8%

8.0%

12.6%

13.4%

13.8%

24.8%

Leisure Equipment

Business & Industrial

Gardening & Agriculture

Classified - Consumer-to-consumer

Government, social, poiltical organisations

Retail

Consumer Goods

Property

Telecoms

Travel & Transport

Entertainment & the Media

Automotive

Technology

Finance

Recruitment

IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 43% of online revenues in H2 2006.


Automotive and Technology are catching up with the perennial leaders

2.8%

10.1%

10.1%

17.4%

0.6%

0.9%

1.0%

1.2%

3.3%

4.4%

4.6%

5.3%

5.8%

13.4%

1.3%

0.4%

1.2%

2.7%

4.9%

1.2%

6.1%

12.4%

6.9%

22.1%13.8%

24.8%

12.6%

8.0%

Business & Industrial

Gardening & Agriculture

Classified - Consumer-to-consumer

Government, social, poiltical organisations

Retail

Consumer Goods

Property

Telecoms

Travel & Transport

Entertainment & the Media

Automotive

Technology

Finance

Recruitment

H2 2006

H2 2005

IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 43% of online revenues in H2 2006.

Barclays Business

Mercedes A-S

Ikea kitchens

Industry sectors summary – H2 2006

• The top 3 categories accounted for over half of online ad spend (52%) and continued to be led by Recruitment (+2.7 point), followed by Finance and Technology.

• Technology (+6.5 points) and Property (+3.4 points) strengthened their positions to the detriment of Finance (-3.6 points) and Entertainment and Media (-2.1 points).

• Share for Retail, though still small, increased by 0.6 point, while consumer goods declined by 0.5 point.

• Automotive held its position with an increase of 0.2 point year-on-year.

Overall Summary

Overall summary

• Online ad spend leaps by 41.2% year-on-year (on a like-for-like basis) in a relatively flat total media market

• £2,015.8m was spent across the twelve months to December 2006

• 11.4% share of advertising revenues in 2006

• With a share of 12.4% in the second half of 2006, online has overtaken National Press (10.5%) by almost 2 share points.

• Search, display and classifieds have all experienced impressive growth

• Eighteen record-setting quarters in succession

• While Recruitment retains the pole position, Technology and Property are the share point winners

Overall summary

The next milestone

£2.5 billion• A real possibility in 2007 • This would make online bigger than direct

mail

Online poised to overtake direct mail

0

100

200

300

400

500

600

700

800

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Internet Direct Mail

£m


Could online overtake TV by 2010?

0

200

400

600

800

1000

1200

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Internet TV

£m


All the companies taking part, representing thousands of websites

and to

Our thanks to…

Paul PilkingtonDirector

Colin MacleodResearch Director

http://www.warc.com/

UK Online Adspend Study Results for the full year 2006

Prepared by PricewaterhouseCoopers for the IAB

For more [email protected] 7886 8282

Question time

welcome richard eyre, chairman, iab guy phillipson, chief executive, iab laurence bird, head of...

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