Forrester Sees Steady Growth for European Online Marketing

Online marketing endeavors in Europe will gobble 18 percent of total media budgets by 2012 as spending increases from its 2006 level of €7.5 billion, or $10.3 billion, to more than €16 billion, or $22 billion, according to Forrester Research.

The online advertising market in Europe will grow at a compound annual rate of 14 percent between 2006 and 2012, says Forrester, with search growing at 14 percent, e-mail at 10 percent and display ads at 14 percent.

The findings are part of a new report from Forrester that says companies are planning to strongly pursue a “growing Net audience that relies on the Web for a widening range of decisions.” The report, written by Forrester researcher Rebecca Jennings, says companies, “after five years of dipping their toes into” online marketing, now acknowledge the Internet is an important place to find new customers and retain them.”

The study says search will grow from €3.7 billion, or $5.1 billion, to €8.1 billion, or $11.1 billion, with paid search taking 81 percent of the expenditure. It also predicts that display ads will double over the next five years, growing from €2.5 billion, or $3.4 billion, in 2006 to €5.6 billion, or $7.7 billion, in 2012. E-mail marketing, says Forrester, should hit €2.3 billion, or $3.2 billion, in 2012, up from €1.3 billion, or $1.8 billion, in 2006.

Most of the online marketing growth will take place in the U.K., France and Germany, which is expected to enjoy particularly strong growth as broadband access expands, says Forrester.
The firm maintains about 52 percent of Europeans regularly access the Internet from their homes and 64 percent of those who do are hooked up with broadband connections.

In fact, Europeans are spending more time browsing the Web than watching TV or reading newspapers and magazines, according to Forrester. The researchers found that 36 percent of those who access the Web say they watch less television because they’re online instead, “enough reason for any marketer to review their media mix.”

Consumers in Europe are increasingly relying on the Internet for everything from shopping, finding the latest news and gossip to conducting research, says the report. The Web is now “at every point in the consumer purchase and consumption cycle,” notes Forrester, meaning marketers have many opportunities to engage potential customers.

There is, however, a fly in the ointment. “Trust in many types of advertising is low,” reports Forrester. It says about 67 percent of online consumers think advertisers lie in their ads. The fact that 40 percent of these people trust price-comparison sites, and 36 percent trust online product reviews from other users “opens the doors for new online marketing forms like word-of-mouth (WOM) email campaigns and blog advertising,” suggests Forrester

European companies, “after several slow years,” are now increasing online spending, says Forrester. It believes 54 percent of companies budgeted more for online spending in 2007 than they spent last year. Display advertising continues to be popular with most marketers as nearly all of them reported using banner ads and many using buttons and online sponsorships. More than half use rich media ads, says Forrester.

Forrester found emerging channels like word-of-mouth and social networking are now generating interest. “Social media will bring real-time intelligence,” wrote Jennings. “As different types of social media strengthen their grip on users, expect marketers to jump on the bandwagon by switching ad euros to social media forms like RSS, blogs, and networks.”

She also said publisher and agency consolidation will present marketers with “easier routes online through integrated media operations” by erasing some of the complexity of placing ads online. Jennings, however, expects marketers will “maintain some independent relationships, both for best-of-breed channel expertise and for third-party validation of strategies and results.”