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Internet ads rise despite cuts in marketing

Internet advertising is coming out on top as overall marketing budgets see a second consecutive quarter of cuts, and planned spending for the rest of the year suffers further downgrades, according to the Institute of Practitioners in Advertising (IPA) quarterly Bellwether report.

Unexpectedly weak sales, wary consumers and continuing economic concerns are behind cost-cutting measures that have taken a considerable bite out of forecast spending plans in the first three months of the year. One in five companies has revised their direct marketing spending plans downward, the sharpest fall in eight years. And 16 per cent have cut "below-the-line" activities such as events and market research, which is the steepest drop for 24 months.

"The negative balance is relatively small, but there clearly is a slowdown in consumer spending and that is reflected in the budgets," Moray MacLennan, the president of the IPA and European chairman of M&C Saatchi, said.

Although total expenditure is still set to rise this year compared with last, actual growth will fall far short of the budgets set in January and will be nowhere near the trajectory at the start of 2007.

Advertising in main media such as print, TV and outdoor was the only category of spending not slimmed down in the first three months of the year. But the figures are inflated by the inclusion of internet marketing, which is the only category to have seen the majority of budgets revised upwards. More than a quarter of respondents increased their forecasts between January and March, with particular emphasis on advertising linked to web searches.

The growth may be partly explained as a continuation of a five-year trend to spend more online. But the accountability of web ads, which enable companies to track the number of clicks and the number of sales that result, makes the platform more resilient in difficult times.

"Internet spending is likely to remain buoyant," Mr MacLennan said. "But spending online really just milks the existing brand, so the interesting issue will be how firms balance the need to keep topping it up offline."