Online advertising overtakes TV sales for first time ever

Paid-for search, led by Google, is proving 'recession-friendly'

The advertising market experienced a "significant" shift this year as companies spent more money on the internet than on television for the first time. Spending on internet advertising grew 4.6 per cent in the first half of 2009 to hit £1.7bn, according to digital marketing trade body Internet Advertising Bureau (IAB). Advertising on television amounted to £1.6bn, down from £1.9bn year on year.

"The internet has now overtaken television advertising to become the UK's single biggest advertising medium," the IAB said, adding it now accounts for 23.5 per cent of the total market. Industry experts pointed to more time spent online, faster broadband speeds and more sophisticated online techniques as reasons for the shift.

The IAB said: "The results signal a significant restructure of marketing budgets as advertisers follow their audiences online and look to the internet for even more measurable and accountable methods." The body's chief executive, Guy Phillipson, said: "Internet advertising has beaten all expectations to achieve growth in the most challenging market conditions."

Spending on internet advertising in the UK hit £3.3bn in 2008, up 17 per cent year on year, while total advertising spending fell 3.5 per cent to £17.5bn.

Stefan Bardega, director of digital at Mediacom, who specialises in media buying on the internet, said: "Online has surpassed television earlier than we expected," adding the move was driven by the recession. He said: "There is further to go, as it still doesn't match up with the amount of time some core demographics are spending online."

The favoured method of advertising online is through paid-for search, which is dominated by Google. Search is proving "recession-friendly," the IAB said, with spending increasing almost 7 per cent in the first half of 2009 over the same period last year, to £1.05bn.

It made up almost 60 per cent of online advertising expenditure. Google made about 97 per cent of its revenues from advertising last year, with about 70 per cent from paid-for search.

While classified advertising in print publications has been declining, it grew by a tenth this year online. The online value hit £385m in the first half, or 22 per cent of online spending.

Display advertising was not so successful, falling 5.2 per cent year-on-year to £316.5m. The IAB pointed out this was not as bad as display advertising in mainstream media, which saw double-digit declines.

Eva Berg-Winters, online advertising expert at PricewaterhouseCoopers, said the extent of the move to digital technology was "perhaps surprising", but added that "online is constantly innovating, developing itself and pushing itself to be better".

Experts said that the change in users' habits underpinned the move online. Mr Bardega said: "The audiences are moving online and the advertising money is following it," he said, pointing out that 16- to 24-year-olds were now spending 29 per cent of media time on the internet.

The move has been helped by the rise in faster and cheaper broadband. The report quoted the British Market Research Bureau Internet Monitor from May, which said that 92 per cent of people now had a broadband speed of over MB. "That is allowing companies to use more innovative formats," Mr Bardega said. Video advertising has increased 195 per cent year-on-year, showing what the IAB said was a "willingness to experiment and invest in more engaging and interactive multimedia content".

Dave Katz, head of trading at Media Contacts, said: "The measurability really sets it apart. You can track any money you spend online," adding the industry was built around ad revenues. "Television was initially built without advertising in mind, whereas online was driven by those revenues."

Thinkbox, the trade body for TV advertisers, said it was "meaningless" to sweep together all the money spent on the diverse aspects of online advertising. Marketing director Lindsey Clay said: "TV advertising is proven by impartial sources such as the IPA and PwC to be the most effective ad medium pound-for-pound. But it is even more effective when put together with online. They are the perfect marketing marriage." She added that one of the most exciting advertising opportunities online "is TV content". Also the IAB's figures do not involve sponsorship, spot and interactive advertising.