Online ad spending remains strong on both sides of the Atlantic, but two reports examining growth rates shows U.K. edged out the U.S., based on the pace of spending, during the first half of 2007.
Spending on online advertising in the U.S. for the first six months of 2006 increased 26.4 percent compared to the same period in 2006, according to a report released last week by the Internet Advertising Bureau (IAB) and PricewaterhouseCooper (PwC). That compares to a 37 percent U.S. increase reported for the first six months of 2006 compared to the same period in 2005.
In contrast, U.K. spending rose 41.3 percent year-over-year in the first six months of 2007, compared with 41.2 percent for same period the previous year, according to a separate IAB/(PwC) report also released last week.
“I wouldn’t be at all surprised if we see a very similar rate of growth in the U.K. for the next half-year period as well,” Nicki Lynas, manager of entertainment and media practice at PwC told ClickZ. “Online spending in the U.K. is showing no signs of slowing.”
The IAB U.S. report, echoing findings from both Nielsen and TNS Media Intelligence recently, suggests that the U.S. online advertising market is beginning to tail off, which could be more than just a sign of maturity.
Alex Marks, U.K. head of marketing at Microsoft Digital Advertising Solutions said the figures reflect a more mature U.S. market. “However, I would still say that the momentum is with the U.K. now in many respects. Consumers are much quicker to adapt to new technologies, and are, on the whole, living a more ‘digital life’ than those in the States.”
“In the U.K., the growth will continue to be driven by businesses that haven’t ‘got it’ coming round to online advertising, and businesses that have investing more as a result,” he said.
Based on total amount spent, online ad revenues in the United States remained higher than in the U.K. The total spent in the U.S. reached nearly $10 billion during the first half of 2007, compared to $2.7 billion, or £1.3 billion in the U.K.
The IAB report also found that U.S. advertisers are spending in different ways compared to their U.K. counterparts. The U.S. is seeing a shift away from classified ads, which have dropped from 20 percent to 17 percent of overall revenue; meanwhile, search and display ads have increased 1 percent each, and now account for 41 percent and 32 percent respectively. Lead generation and e-mail make up the remaining 10 percent.
The U.K. figures suggest the opposite, however, with a slight drop in revenue share for both search and display formats and a 3 percent increase for classified ads. Classified ads represent about 21 percent revenue share.
“Classified ads offer great value for money in the U.K., probably more than in the U.S.” Lynas said. “The sector is a lot easier to run in the U.K., mainly, I suspect, due to the size of the country. It will be interesting to see the effects of local search on a more fragmented U.S. market, and if this prompts a resurgence in classified ads.”
The study states that online now represents a 14.7 percent share of the overall U.K. advertising market. Although the U.S. report does not provide such a figure, a calculation using the TNS Media Intelligence 2007 forecasts of $157.3 billion puts that portion just shy of 13 percent.
With an additional focus on a relatively untapped European market, the share of ad dollars going online could climb more.
“Europe as a whole has been far behind the U.S. up to this point. However, it is beginning to catch up, and offers great opportunities for advertisers,” Marks said. Lynas predicted Europe would rival the U.S. market in three to four years.