Internet ad budgets keep rising despite economic turbulence

U.K. Internet advertising budgets grew further in the fourth quarter of 2007 despite cutbacks in other channels, according to the latest Bellwether report from the Institute of Practitioners in Advertising (IPA).

The report states overall advertising budgets took bigger cuts in the final quarter of 2007 than at any time in the last two years, with 19 percent of companies reporting a decrease and only 15 percent an increase.

Spending in the digital arena remained strong however, with Internet budgets rising at more companies than in any other category.

Thirty-nine percent of companies involved in the survey said they had revised their online budgets upward during the last three months of the year, with only 7 percent revising them down.

Back in Q3 2007, only 30 percent of companies increased their online marketing budgets, with 7 percent seeing a decline.

All main sectors reported an average increase in digital spending. The strongest growth was recorded in the auto, fast moving consumer goods, travel & entertainment and government sectors. This diversion of budget towards digital now gives it a nine percent share of the total ad market, up from 6 percent reported in the Q3 report.

Although far stronger than any other category, the increase in online spend was still the weakest the Bellwether has seen in four years, highlighting the effects of the current financial climate on the industry.

In a statement, Wayne Arnold, European chief executive of digital agency Profero and chairman of IPA Digital said, "The fact that it was the lowest level of (online) growth since Q3 2003 illustrates the positive reality that the internet is now core to many clients' marketing needs, so unfortunately not entirely immune to the current economic environment."

Robert Lerwill, CEO of Aegis group added, "Despite widespread talk of a slowdown, we had a good finish to the year in the U.K., where, as of today, client spend remains healthy. All the same, it's only prudent to have our antennae up for any signs of softening demand, and we will be watching trends carefully as 2008 goes on."

The Q4 2007 report is the first time the Bellwether report has collected data on revisions to search/SEO budgets. The findings for search reflect the overall increase for total online budgets, with 23 percent reporting an increase in search spend, compared to 7 percent reporting a cut.

The remainder of the Internet category comprises Web sites, banners, pop-ups, corporate blogs and online gaming. Data for IPA reports are compiled from a questionnaire survey of around 250 U.K.- based companies across a range of sectors.

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