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U.K. Digital Ad Growth to Go from Double to Single Digits

The U.K.'s online ad market growth is poised to slow significantly in 2009.

Online ad spending is expected to grow just 3.7 percent next year, down from 22 percent year-on-year in 2008, and 36 percent in 2007, according to forecasts from WPP-owned media buying arm, GroupM.

Spending on most media is contracting as the recession bites hard. But the group's annual "This Year Next Year" winter report predicts digital will be the only advertising market in the U.K. to experience growth in 2009.

Overall ad spend in the U.K. is expected to drop by 6 percent next year, with national newspaper spend down 12 percent, B2B magazine spend down 14 percent, and T.V. spend down 6 percent year-on-year.

Within the digital arena, search ad revenues will continue to edge up, but display and classified ads are in for a tough year. Search spend will grow at a rate of around 7 percent in 2009, but that's a far cry from its 30 percent growth rate of 2008. Display and classifieds will have it even worse. Spending on both will fall by 2.7 percent in '09, compared with 10 percent growth last year, the report predicts.

As for this year, Group M's previous 2008 overall online growth forecasts have been revised down from 30 percent to 22 percent over 2007. Still, the firm did not alter its forecast when it comes to paid search growth in 2008, which remains static at 30 percent. This points to a decrease in display and classified ad spending this year, a trend affecting publishers and portals currently forced to lower CPM rates.

The report suggests the display drop is not necessarily the result of inventory supply outstripping demand, but simply a result of the display market becoming more efficient, due in part to the widespread use of networks and exchanges. It adds that diminished competition from financial advertisers is likely to put especially strong downward pressure on display prices in that sector in 2009.

Though the report has its bright spots for digital advertising ,it predicts a long road ahead. "Past UK recessions have lasted one or two years. This one feels like a two, and we are evidently some way from the bottom. Any sign of recovery in 2009 would be a nice surprise."

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