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In 2006 £2.016 billion was spent online by advertisers targeting the 31 million (GfK NOP) people connected to the internet. The growth has increased the internet's share of all advertising revenues to 11.4%, up from 7.8% in 2005.

“2006 was a tough 12 months for the advertising market as a whole, but once again the internet bucked the trend, recording a 41% increase in ad revenues.”
Guy Phillipson, IAB CEO

Online spend boosted the entire advertising industry, which grew by 1.1% in 2006. With almost all expenditure on traditional media in decline, the upward momentum of the internet reflects a new era in marketing communication and consumer behaviour, which is driven by high-speed broadband take-up and user-generated content. 

The figures are from the biannual online advertising spend study by the IAB, carried out in partnership with PricewaterhouseCoopers (PwC) and the World Advertising Research Centre (WARC). 

So what do these figures mean exactly? Here are the headlines:

Internet overtakes national newspapers
The results reveal that expenditure on the internet overtook advertising in national newspapers, which last year recorded growth of 0.2% to £1.9 billion and a market share of 10.9%. In 2006, the internet was just over half the size of the TV advertising market, which experienced a fall of 4.7% to £3.9 billion.

“The incredible growth of online has beaten all the industry predictions. The internet has now overtaken National Press as marketers have followed their audiences online and enjoyed measurable returns on their investment.”
Paul Pilkington, Director, Entertainment and Media practice, PricewaterhouseCoopers LLP

UK advertising sector driven by internet
Advertising across all traditional media combined fell by £466.1 million year-on-year, a 2.9% decline. However, with the increase in online advertising spend, the entire market grew by 1.1%.

Second half of 2006 saw record spend
In the second half of 2006, online advertising experienced its highest market share ever reported when expenditure topped £1.098 billion - a 12.4% share of total UK advertising.

UK nearly double average global share
The UK now leads the world for share of advertising spend online as the global average is currently 5.8% (source: ZenithOptimedia).

Formats: Strong growth for display advertising, classifieds and paid-for search

In 2006, online display advertising (including banners, skyscrapers and online sponsorships) rose 35% year-on-year to £453.7 million.

Traditional advertising formats, such as banners, were reinvigorated by an increase in the use of rich media, which includes graphics, audio, video or animation. Once again online display advertising is experiencing growth far greater than any other display medium. 

The growth of paid-for search (sponsored listings that advertisers pay for when a consumer clicks through to their site) was sustained, increasing by 52% to £1.2 billion of total online ad spend or a 57.8% share. 

Online classified advertising was also up 45% to £379 million, a share of 18.8%. This is in contrast to traditional press classified advertising, which experienced a significant decrease of 7.8% year-on-year. 

Categories: Automotive, Technology, Property and Retail up

The online advertising market continues to be led by the Recruitment category, up 2.7% points, followed by the Finance and Technology categories.

Automotive was ranked fourth with an increase of 0.2% points, while the fifth placed Entertainment & Media sector fell 2.1% points 

The biggest gains were seen by Technology, up 6.5% points, and Property, up 3.4% points. Retail also increased its share by 0.6% 

The key drivers for the growth:

Broadband
According to BMRB, 26% of internet users' media day is spent online largely thanks to the booming proliferation of broadband, which is in 10 million UK households - this means that the internet has overtaken radio as the second most consumed medium after TV. 65% of the UK population is online, 89% of at-home users are on broadband and a third of them use wireless

Advertisers seize the power of online video
Faster, cheaper broadband means marketers are increasingly experimenting with video and more engaging, creative advertising or rich media (graphics, audio, video or animation) adverts. These advertisers recognise that video is a catalyst for staying online for longer and awareness is higher when video ads are employed. The increase is more than twice as high when video ads are used compared with the increase in ad awareness across all online display ads (source: DynamicLogic). 

Explosion of user-generated content and social networking
During the past 18 months, user-generated content and social networking websites have opened up the internet to a new generation. As advertisers realise that mass audiences are uploading their own pictures, videos and blogs instead of consuming traditional media, they are discovering new ways to engage consumers through in-game advertising and online video technology.

 In conclusion
The internet is proving itself a hugely popular mass medium and advertisers are continuing to switch more of their budgets online to build their brands and interact with their customers. With consumers now enjoying even faster broadband and installing wireless routers in their homes, the growth of online advertising in the UK is set to continue unabated