ONLINE ADVERTISING: A UK update

The UK online advertising market

• During the downturn in the global ad market some advertisers have retreated to using traditional media, evaluated and measured to a tested formula. Other advertisers have found that online advertising has proved more cost-effective and spent on this medium a higher proportion of their budgets as these have shrunk. This goes some way towards explaining recent conflicting statistics on the health of the UK online advertising market.
• There has been little radical innovation in online advertising in the last year, but the old favourites of banners and buttons are being put to use in far more sophisticated ways.

Market sizing

• The consensus is that UK online ad spending has grown since 2000 and continued to grow in 2001 despite a dip during the first three-quarters of the year. In both the UK and the US (where the market is slightly ahead), online advertising remains a very small percentage of overall advertising spend.

Types of online advertising

• Options for online advertisers range from basic banners, buttons, pop-ups and pop-unders to a number of new online ad shapes and sizes defined by the IAB, interstitials, shoshkeles (animated ads with audio which require no plug-ins or downloads), extend banners, intro messages, launch pads, search forms, download offers, games and more.
• There has been widespread and controversial experimentation in charging mechanisms for online advertising. Models can be a blend of several charging methods, but the most common remains the cost-per-thousand impressions approach.

How effective is online advertising?

• Enthusiasm for clicking through to sites from banner ads has waned among users, leaving advertisers far more keen to measure online ads by traditional means - by brand and by response.
• A consensus is beginning to emerge that online has gained a place in the media mix but that true interactivity between the advertisers and the customer will be necessary to underline the advantages over traditional media.

Who is advertising online?

• Online-only brands remain top of the list on online ad spending and number of online campaigns. However, there are a number of major offline companies who now appear towards the tops of these lists.
• Experts estimate that the top ten UK online sales points account for 80% of UK online ad spending. News sites, portals and sites occupying a well-defined niche prove the most popular among advertisers.

Comparison with traditional advertising

• Banner ads have been shown to be 40-80% better than TV, magazines and newspapers in brand recall and generating interest in a brand. In terms of generating brand awareness, banner ads are thought to be better than TV but slightly worse than magazines. Web sites often have a much wider reach than traditional media, particularly internationally.