Downturn to take toll on Internet ads- report

The growth in online advertising is set to slow dramatically slow this year due to the downturn in the UK economy, but it will fair stonger than other mediums, according to a report. The study, from PricewaterhouseCoopers, forecasts that advertisers will shun the display ads which underpin many websites. There will still be stronger growth in online advertising than spending on other media, such as television and newspapers, but growth is expected to slow from 38% in 2007 to 20% by the end of this year. Budgets reduced PWC said the slowdown was not caused by advertisers cutting online from their marketing spend, but by advertisers reducing their overall budgets. Online advertising in Europe is third largest segment of the market after newspapers/magazines and TV in several countries including the UK. Last year PWC estimated the European online advertising market was worth 11billion euros (£8.7bn). The UK is Europe's largest online advertising market. Spending on internet adverts was 3.825billion euros last year, up 38% and accounting for 20% of the entire UK ad market, according to PWC. "As the economy shrinks and consumption decreases, the perceived need by companies to invest in brand advertising, or to keep pace with spend by competitors is less acute. "While in the UK, share of display in total online advertising spend decreased from 28% in 2004 to 21% in 2007%, this may shift even further if the downturn is prolonged," PWC warns. Advertisers turn to search Those who are still spending, meanwhile, demand a better return on their investment so they put their cash into online search, where results can be more easily measured. Prices are also likely to decline as a multitude of websites chase too few advertisers. However, spending on search advertising is likely to outperform the overall online market this year, growing at slightly less than 30% in the UK. "In a time of economic uncertainty, advertisers often take a more cautious approach," according to the PWC report. "Consequently, there is an increasing focus on measurable return on investment of online campaigns, shifting some budgets from brand-building related towards direct response spend. This trend is benefiting search."

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