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Welcome

Welcome. Richard Eyre, Chairman, IAB Guy Phillipson, Chief Executive, IAB Laurence Bird, Head of Planning & Research, IAB Paul Pilkington, Director, Entertainment and Media Practice, PwC. UK Online Adspend Study Results for the full year 2006. Prepared by PricewaterhouseCoopers for the IAB.

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Welcome

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  1. Welcome Richard Eyre, Chairman, IAB Guy Phillipson, Chief Executive, IAB Laurence Bird, Head of Planning & Research, IAB Paul Pilkington, Director, Entertainment and Media Practice, PwC

  2. UK Online Adspend StudyResults for the full year 2006 Prepared by PricewaterhouseCoopers for the IAB

  3. Background • Census of all major UK online media owners • Official Advertising Association figures since 1997 • Information collected each half year • Analysis available by • Format • Industry category

  4. Agenda • Study methodology • Market background and trends • UK online adspend – headline results • Online in context • The digital media mix • Industry categories • In summary • Questions & answers

  5. Methodology

  6. A brief history… • The IAB has been working with PWC since 1997 to survey the value of the online advertising market. • We have run projects in Europe and North America to assess the size of the interactive media markets. • These figures have become the industry standard for measuring advertising spend and in the UK are now used by the Advertising Association. • 102 companies have participated in the survey representing thousands of websites. • Reported figures are not adjusted to account for other organisations that have not participated. • Total advertising revenue is reported on a gross basis. • The figures are drawn up on the basis of site declaration. They cover thousands of UK websites, but by no means all.

  7. Research participants Acxiom Ad2-one Adept Scientific Adlink Advertising.com Adviva AOL AffiliateWindow AskJeeves Associated New Media Autotrader BBC Blue Lithium BMJ BoltBlue Bounty BSkyB Channel 4 Chinwag Chrysalis Radio Classic FM CNet Condenast Confetti Dennis Interactive DGM Dixons E-circle Economist EDR EMAP E-Type Euroclick Everyclick Future PublishingFaversham House Group Financial Times Find.co.uk Findaproperty Fish4 Five Friends Reunited GCap Radio Google Guardian Habbo HachetteFillpacchi Handbag Haymarket IPC Media IPT i-Points ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster MSN My Space National Magazines Net Communities Netrecruit News International Orange Overture Property Finder Real Media Reed BusinessInformation Reuters Right Move Scotland Online Sift SRH Skupe Teamtalk Telegraph Tesco Tiscali TMN Media Tradedoubler UK Net Guides Unanimis Upmystreet U Target Valueclick Viacom Brand Solutions Virgin Radio WanadooWME Workthing Yahoo! Yell …Plus further recruitment sites, courtesy of WARC Representing thousands of UK websites

  8. Market Background

  9. June 2005 Dec 2005 Jun 2006 Dec 1996 June 1997 Dec 1997 June 1998 Dec 1998 June 1999 Dec 1999 June 2000 Dec 2000 June 2001 Dec 2001 June 2002 Dec 2002 June 2003 Dec 2003 June 2004 Dec 2004 Online audience growing steadily Millions of people Source: Gfk NOP World, To June 2006

  10. Broadband access at home Source: BMRB Internet Monitor, Q4 2005 Base: All who have used the Internet at home on a computer in the last month

  11. Faster and more convenient broadband access is changing the way the internet is used A third have used wireless broadband in the last month Q. What is the connection speed of your home broadband? Base: All broadband users who knew their speed of connection (443) Source: BMRB Internet Monitor Nov 2006

  12. Online second only to TV% of media time for all internet users Weekdays Saturdays Sundays Source: BMRB Internet Monitor, Nov 2006 Base: All Internet users aged 15+

  13. Recent headlines

  14. The biggest online Christmas

  15. Plea to agencies It warns agencies they will no longer be competing solely among themselves, adding ‘Allies may become competitors, advertisers may become suppliers and agencies may become media owners’ They suggest it is time to ditch the traditional description of ‘above the line’ and ‘direct’ for broader definitions such as ‘not-named’ for the former and ‘names’ or ‘personalised’ for the latter

  16. This time last year… • Online achieved 60% growth to reach 1.4bn for 2005 • We predicted breaking the £2bn barrier by end of 2006… • But this would mean an increase of 600m – more than the size of radio in itself. • We also said overtaking National Press was a real possibility

  17. 2B or not 2B That is the question

  18. £2 billion

  19. £2,015.8bnmarket in 2006An increase of£649m year-on-year

  20. 2006 vs. 2005 41.2% increase On a like for like basis New contributions in 2006 represented £86.4m

  21. Online advertising nearly £600m in Q4 ‘05 ‘04 ‘06 ‘02 ‘03 ‘01 £ millions Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  22. Online in context… Breaking market trends in the UK ad industry

  23. Market share over 11%Full year 2006 Internet 11.4% Total advertisingmarket £17.6bn Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

  24. Online drives the whole marketYear on year growth for 2006 Total advertising market growth = 1.1% Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / Radio Advertising Bureau/ WARC

  25. Online’s share growth accelerates Market Share Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

  26. Second half market share hits 12.4%A new world record Largest share Anywhere in the world Internet 12.4% Total advertisingmarket – H2 06 £8.8bn Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

  27. Television Press - Display Direct Mail Press - Classified Internet Outdoor Radio Online’s strong progress continues £ millions N.B. WARC Recruitment data included from 2003 Source: PricewaterhouseCoopers / Internet Advertising Bureau / Advertising Association / Radio Advertising Bureau / WARC

  28. Online overtakes National PressFull year 2006 £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

  29. Summary – Full year 2006 • Online advertising driving growth of the entire media market • Internet advertising breaks the £2bn barrier in 2006 to reach £2,015.8m • Online achieved a share of 11.4%, up almost 4 points from 2005 (7.8%) • The market grew 41.2% year-on-year, maintaining the strong growth of previous waves

  30. Summary – H2 2006 • In the second half of the year, online advertising was worth £1,098.6m • The internet’s share of all advertising expenditure actually reached 12.4% • Revenues for Q4 nearly £600m – 10 times the size of Q4 2002

  31. The digital media mix The developing mix of ad products

  32. The digital media mix% share of revenues for the full year 2006 Full year total – £2,015.8m IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  33. The digital media mixAll groups of formats have experienced strong growth +52% +35% +45% £ millions IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  34. The digital media mix% share of revenues for 2006 £321.5m £20.1m £14.0m £73.2 £15.8 £9.1 £17.5m £ 215.2m £133.2m £30.6m £1,165.6m IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  35. The digital media mixYear-on-Year Comparison £ millions IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / WARC recruitment classifieds / Internet Advertising Bureau

  36. Strong growth of search continues £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

  37. Search is the gateway to brands • People use search as a stepping stone to find the advertiser’s brand site • More than 8 out of 10 users rely on a search engine after partially remembering a website address • At least half of all e-commerce transactions (£30bn in 2006) begin with a search • Search is now a £1.1bn medium Source: Yahoo! Search Marketing, ISOBAR, UDA research 2005; Google

  38. Continued growth in further classified £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

  39. Display: breadth of formats £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

  40. Formats summary – 2006 • Revenues increased across all formats, except for sponsorships and interruptive formats (pop-ups) • With revenues of £1,165.6m, search maintained its dominant position • YoY, display was up 35% to £454m while search increased by 52% and classifieds grew by 45% to £379m • Classifieds: recruitment increased by 18% to £215m and other classifieds grew by 67% to £133m

  41. Industry categories

  42. Recruitment sector continues to lead the market in the second half of 2006 IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 43% of online revenues in H2 2006. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  43. Automotive and Technology are catching up with the perennial leaders IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 43% of online revenues in H2 2006. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

  44. Barclays Business

  45. Mercedes A-S

  46. Ikea kitchens

  47. Industry sectors summary – H2 2006 • The top 3 categories accounted for over half of online ad spend (52%) and continued to be led by Recruitment (+2.7 point), followed by Finance and Technology. • Technology (+6.5 points) and Property (+3.4 points) strengthened their positions to the detriment of Finance (-3.6 points) and Entertainment and Media (-2.1 points). • Share for Retail, though still small, increased by 0.6 point, while consumer goods declined by 0.5 point. • Automotive held its position with an increase of 0.2 point year-on-year.

  48. Overall Summary

  49. Overall summary • Online ad spend leaps by 41.2% year-on-year (on a like-for-like basis) in a relatively flat total media market • £2,015.8m was spent across the twelve months to December 2006 • 11.4% share of advertising revenues in 2006 • With a share of 12.4% in the second half of 2006, online has overtaken National Press (10.5%) by almost 2 share points.

  50. Overall summary • Search, display and classifieds have all experienced impressive growth • Eighteen record-setting quarters in succession • While Recruitment retains the pole position, Technology and Property are the share point winners

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