U.K. Online Ad Spending Slows

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Financial uncertainty is taking its toll on U.K. digital ad spend, says the Q2 Bellwether report from the Institute of Practitioners in Advertising (IPA) and Markit Economics, released today.

The report's findings suggest that online marketing, SEM and SEO budget growth in the U.K. in Q2 2008 was at its slowest since 2003, with digital spending up just 6 percent in Q2 compared with a 21 percent rise in Q1 over the previous quarter.

However, all other marketing sectors covered by the report saw their budgets cut over the same period, suggesting that digital spending will be the last to suffer in the face of a potential recession. This also suggests a potential rise in overall market share for digital, though this is not measured in the report.

"As expected, given the economic climate, total marketing budgets have come under pressure of late," said Matt Simpson, chair of IPA Digital and group head of digital at OMD, in a statement sent to ClickZ News. However, he continued, "Despite growth being more modest than in recent quarters, marketers are seeing the opportunity for the Internet to drive their business."

Of the 250 companies surveyed for the report, 19 percent said their online budgets had increased for Q2, compared with 27 percent in Q1. In addition, 12 percent reported a downward revision in Q2, in contrast to just 5 percent in the previous three months.

Within those budgets, search spending held up a little better, netting a nearly 10 percent increase for the second quarter of the year. Eighteen percent of companies reported an increase in search spend, with just 9 percent reporting a decrease, perhaps reflecting a shift towards more accountable ad formats, even within the digital sector.

Tech and Computing advertisers boosted search ad spending in the second quarter, while Retail, Travel and Entertainment advertisers decreased search ad expenditures.

So, what does the remainder of the year hold for ad budgets? Further cutbacks, says the report, suggesting that falling ad spend in late 2008 is an "increasingly likely prospect." The extent to which digital budgets will continue to be affected remains to be seen.

"The report certainly reflects the increasing gloom of the past few weeks. There is a clear implication that the economy will slow further," said Moray MacLennan, IPA president and chairman Europe M&C Saatchi, in a press release. "Agencies cannot affect the short term economic outlook, but they can do at least two things; firstly, focus even more closely on cost control and secondly, strive for even more original and innovative solutions so they can buck the trend."