The economic slowdown is partly responsible for the continued internet advertising boom, said Guy Phillipson, CEO of the IAB in the U.K.
Budgets insulated from risk
"Online budgets are pretty much ring-fenced. Marketers can see exactly where their money is going, and it's the last medium to have budgets cut," Mr. Phillipson said. "Given a choice between traditional and online media, you'd maintain your online spend."
A 38% hike in internet advertising spending brought total online budgets up to $5.6 billion in 2007. Growth is expected to continue above 30% for 2008 and remain strong in 2009, with the result that the internet will overtake TV's $8 billion revenues next year.
Although internet growth is inevitably slowing down, it is still stronger than expected: In just three years, online advertising spending in the U.K. has increased by $4 billion. The U.K. media advertising sector as a whole grew much more slowly, with 4.3% growth in 2007 to reach $36.8 billion.
The report -- compiled in partnership with Pricewaterhouse Coopers and the World Advertising Research Centre -- shows that online advertising currently accounts for 16% of media spending.
Mr. Phillipson said that growth of the internet as an advertising medium has been driven by "cheap technology and the fantastic broadband infrastructure in the U.K. Around 50% of us use wireless, and a PC plus two laptops is not uncommon in most British homes. More and more marketers are taking advantage of the technology and using rich media and video online to build their brands."
The biggest spenders online are recruitment advertising (25.7% share of the internet ad market), automotive (11.9%), technology (10.4%) and finance (10%). Advertisers in some of these categories spend up to 25% of their overall marketing budgets online.
Telecoms, entertainment, consumer goods, travel and transport and retail are in the second tier of spenders, with 5% or more of their budgets spent on digital media.
Bob Wootton, director-media and advertising affairs at the Incorporated Society of British Advertisers, the U.K.'s advertiser association, warned against too much internet hype. "Internet is thriving because it's the refuge of small and medium-sized enterprises in hard times. It empowers and enables a new kind of advertiser to come to market," he said. "There is no surge of big brand advertisers towards the internet."