Media: All about ... Online advertising revenues.(Financial report)

Will adspend continue to rocket in 2007 and beyond?

There has been no avoiding the juggernaut of online as it has gained market share over the past few years. The sector's momentum continued in 2006, with online advertising spend breaking through the pounds 2 billion barrier, following a 41.2 per cent surge in growth.

The results of the Internet Advertising Bureau's online advertising report came as no real surprise to the market, and forecasts already predict another stellar year in 2007. These latest figures reveal that the sector has now eclipsed national newspapers for total advertising share. And, at more than half the size of the TV advertising market, it is starting to chip away chunks of spend from TV, as advertisers use online to build brands and interact with consumers.

The popularity of websites such as YouTube and MySpace is not only helping to draw audiences online, but also advertisers who want to get in on the action. But while online ad budgets are increasing, there is still a game of catch-up in process to align the share of adspend with audience numbers. An indication of even further growth for the internet advertising sector.

Guy Phillipson, the IAB's chief executive, says: '2006 was a tough 12 months for the advertising market as a whole, but once again, the internet bucked the trend. With consumers now enjoying even faster broadband and installing wireless routers in their homes, the growth of online advertising in the UK is set to continue unabated. It's still the beginning; we have the convergence of TV and mobile to look forward to. There is a lot more growth to come.'

1. The big driver behind the market has been the explosion of cheap high-speed and wireless broadband, which has made it easier for audiences to spend more of their time online. In the UK, 65 per cent of the population is online and 89 per cent of at-home users are on broadband. In fact, more than ten million UK homes access the net via broadband. With the average internet user spending 26 per cent of their media day online, the internet is the second-most consumed media after TV, according to BMRB.

2. Broadband has reinvigorated online display advertising - including banners, Skyscrapers and online sponsorship - which attracted pounds 453.7 million in spend (up by 35 per cent on the previous year). An increase in ads using rich-media technologies (graphics, animation, audio or video) helped to shift spend online, as advertisers used the internet for more creative brand advertising, as well as traditional direct response campaigns. Video has been a significant driver in the sector. According to research conducted by DynamicLogic, ad awareness is twice as high when video ads are used, compared with online display ads.