Online ad revenue set to overtake nationals by 2007

Internet ad revenue is set to overtake national newspaper ad revenue by the end of 2007, according to a report by WPP's pooled buying operation Group M.

The FT said the projection would make web ad revenue the third biggest revenue generator globally behind regional newspapers, currently in second place, with television still way out in front.

The Group M report, which drew on data from WPP agencies MindShare, Mediaedge:cia, MediaCom and Maxus, estimated that Internet ads would account for 13.3% of the £12bn a year media ad market by December 2007, with national newspapers marginally behind on 13.2%.

The report also forecasts a 39% rise in Internet ads, compared with a 9% decline for national newspaper ad revenue. GroupM predicts that by the end of 2007, national newspapers' share of the market will drop to almost two-thirds of the levels in 2000.

Adam Smith, futures director at Group M, said analysts have continually underestimated the growth of Internet ads, partly due to the perception that the popularity could not be maintained.

Smith added that search ads accounted for more than half of online ads in 2005, with further growth predicted this year.

However, there is bad news for TV. GroupM predicts TV advertising will drop by 2% this year, and said TV was experiencing "its worst year since 2001" - largely attributable to the global media downturn post September 11. However, TV still has a 28.8% share of worldwide advertising revenue, according to the report.

The TV ad downturn would be felt acutely by ITV1, the UK's biggest ad-funded channel, with an 11% decline in ad revenue predicted at the channel for the end of the year.

The GroupM report concludes that newspaper ads were experiencing a decline in popularity for failing to engage with younger audiences.

The Internet Advertising Bureau has also predicted that online ad revenues will surpass national newspapers by as early as November this year.

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