Transatlantic Pain as Marketers Trim Online Spend

22 September 2008

LONDON: Online advertising – for long the armoured bear that defied the credit crunch – is set to slow after five years of unprecedented growth, according to research published today (Monday) by UK media analyst Enders Analysis.

The firm's latest forecast trimmed year-on-year growth for the UK online advertising market in 2008 to 18.5%, generating £3.3 billion ($6.04bn; €4.20bn) in revenues versus earlier estimates of a 28% increase.

The deepest cutbacks come from the financial, recruitment, and property sectors – primarily display ads – whereas "paid-for search" still retains its momentum.

The firm predicts that display adverts will grow by 9.8% to £650m, and classifieds by 7.8%,  a "collapse" on last year's growth rates of 30.5% and 54% respectively. Conversely, search ads will grow by 25.4% to £2bn this year – an increase  attributed to their faster and easier RoI.

  • Meantime, on the other side of the herring pond, Nielsen reports a decline in H1 for 'picture-based' web advertising – led by a 27% drop in online's largest single sector, financial services.

    And it's not just web Brobdingnagians like Microsoft, Yahoo and AOL who are feeling the pain; equally hurt are publishers and broadcasters who increasingly seek growth online to compensate for sagging revenues elsewhere.

    Nigel Morris, ceo of Aegis Group's digital division Isobar, believes that search revenues will ensure online advertising contiues to grow much faster than other media. But he notes a rapid increase in online display ad inventory, particularly by social networks where response rates are low, the domino effect of which is a decline in ad rates.

    "Run-of-site advertising through online media networks are driving down yield for publishers," Morris warns, while noting that rates for video advertising online are holding up.

  • Data sourced from Financial Times; additional content by WARC staff