Networking sites seen hitting web ad growth

The rise of social networking websites such as FaceBook and MySpace could bring the rapid growth of UK internet advertising down a gear this year, according to media forecasters at WPP, the marketing services group.

GroupM, the umbrella forecasting group for WPP’s media buying teams, cites the increasing time that audiences are spending on such websites as one reason to anticipate a slowdown in the “warp” speed expansion of web advertising.

Any deceleration in internet growth would be relative, especially compared with the sluggish state of UK broadcast and press advertising.

In a report, GroupM estimates UK internet advertising revenues will still increase by 34 per cent in 2007 before adjusting for inflation and by 30 per cent the following year.

These figures would, however, be down from the 48 per cent rise in 2006.

But for comparison, total media and marketing revenue is predicted to grow by a nominal 2.6 per cent this year.

Television, radio and press are all expected to report flat or declining revenue in real terms, though traditional groups are getting “better at clawing back” lost revenue via their digital ventures, the report says.

Adam Smith, GroupM futures director, said: “The rationale behind the internet slowdown theory is that UK broadband penetration can’t continue growing at the same rate, and how much more time can people spend online?

“Unless we can find more ways of shoe-horning advertising into sites or vendors increase the amount of advertising inventory they sell, then at some point it has to slow.

“In addition, running in the opposite direction is the growth of social networks which are much more ad-resistant.”

Mr Smith warned, however, warned that tracking of internet marketing expenditure was still in its infancy, since many business were investing in projects to collect and analyse web data or to build websites that did not fall into conventional marketing budgets.

In the last two years, the internet has provided most of the UK media industry’s growth and the web takes a higher share of total advertising expenditure in the UK than in any other country.

Advertisers are interested in the fast-growing social networks but still grappling with how to market on them. The sites have fewer obvious advertising slots to sell than conventional web publishers and portals or search engines.

Using techniques such as branded banners or pop-up windows to reach online networkers can appear intrusive to users primarily logged on to communicate with other individuals and share music and video clips.

Networking audiences also tend to spread thinly over many different website areas and focus on their own content, such as blogs or homepages.

That distinguishes them from portal audiences, which usually congregate in popular areas such as news, sport or entertainment channels, making them easier for advertisers to target.

Among traditional media, the outdoor sector continues to outperform rivals, growing by almost 6 per cent this year and next.

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