View from the editor's chair: Digital marketing

Digital marketing magazine Revolution is getting a new editor. Gareth Jones takes the hot seat on 2 June. Until then, I'm steering the good ship Revolution for one issue only. Last month I wrote about the digital landscape I've now inherited (as featured in Revolution's Digital Media Buyer's Guide).

The digital landscape is a complex and often confusing place. By its very nature it’s fast moving and therefore difficult to analyse. And yet there are a total of eight different research providers and studies, which all employ different methodologies and produce largely non-comparative data.

The need for information on site traffic, user trends and online advertising has never been more important. At the turn of the year, Group M, the combined media planning and buying operation owned by Sir Martin Sorrell’s WPP group predicted that UK internet advertising spend will overtake TV, which has been the leading advertising medium for a half a century, in 2009.
By the end of 2008, according to Group M, the internet will account for 24.8% of UK media spend, just behind the 26% share held by the TV ad sector. UK internet revenue is likely to climb by 30.8% this year to £3.4bn compared with just 1% year-on-year growth in TV ad spend to around £3.56bn. It’s not hard to see what will happen if both internet and TV revenues continue to grow at this current rate. And it’s easy to appreciate why online data is rapidly becoming the holy grail of the media and marketing strategy.

So what do we know? In 2007 there were 29.8 million people online, which accounted for 63% of the total UK population. Now, there are 32 million people online – 67% of the total British adult population.

According to the BRMB Internet Monitor August 2007, more than 85% of UK internet users have been online for at least three years. And sites where people can buy products or services are still proving to be the most popular online destinations along with checking the weather forecasts.

The power of Google remains dominant. Marketing strategies that use the search engine’s advertising products can relax in the knowledge that in February this year, 27.3 million British users visited Google, which accounts for 84% of the active UK internet population, according to Nielsen Online.

The average internet-related time spent per person during February was 17 hours and 46 minutes. And according to the BRMB August report, the most popular online activity is still the use of email. But at 28.2 million users, three million more of us do it compared with the 25.2million email users in 2006.

More than 13.2 million households in the UK now have a broadband connection compared with 9.9 million in 2006 according to Continental Research. This accounts for 90% of all internet users, up from 84% the year before. According to a report by Pricewaterhouse Coopers, Broadband penetration is expected to continue rising and is predicted to be in 75% of all homes by 2010.

BRMB states that 58% of internet users are now going online every day and Nielsen Netratings’ report in September 2006 measured the average length of each user session to be 53 minutes.

Online advertising
UK online advertising spend increased by 38% last year to reach £2.8bn, according to research published by the Internet Advertising Bureau (IAB) and Pricewaterhouse Coopers on 7 April. In just three years, online advertising spend has increased by £2bn and looks set to justify the predication by M Group at the start of 2008. The medium now has a market share of 15.3%, up from 11.4% in 2006 and is already larger than press classifieds and regional newspapers.

IAB chief executive Guy Phillipson says: “To grow 38% from £2bn to £2.8bn is a very powerful performance and with 15.3% market share of media spend, the UK is head and shoulders above all other major world markets. It’s clear, marketing directors now recognise the value of online to drive their business and more and more are using rich media and video to build their brands, just as they do on TV.”

Total internet display advertising spend saw a 31% year-on-year increase whilst the core formats – banners, skyscrapers and embedded rich media including video – grew by 45% to £592m. Furthermore, spend on embedded formats has doubled during the past two years to account for 79% of total display.

Paid-for search marketing is maturing as marketers become more sophisticated in their use of the medium. In 2007, search grew by 39% in line with overall growth to £1.6bn compared with £1.2bn in 2006. Its market share however remained largely the same at 57.6% compared with 57.8% in 2006.

There’s no doubt that brands are now using search more intelligently, getting a greater return on investment through key phrases and more accurate targeting that reflects consumer behaviour. According to the IAB findings, classified advertising saw a 54% year-on-year growth and was worth £585.3m in 2007 as consumers and marketers recognise online’s reach, flexibility and immediacy.

The breakdown of industry categories in the report reveals that the recruitment sector continues to lead with 25.7% market share, up 0.9 points on the second half of 2006. Second is automotive with 11.9% while technology at 10.4% has overtaken finance at 10% for the first time to take third spot.
Other sectors experiencing high online ad spend growth include retail, which increased by 1.7 points to 5% as a result of a buoyant e-commerce sector and consumer goods, which increased by 1% to account for 5.3% of spend. For the first time, the property sector broke into the top five with a market share of 7.9%.

The key driver for growth is obviously the increased UK online audience. But maybe more surprisingly, the over 50s make up 30% of internet users compared with 21% coming from the 25-34 age range. As the population continues to get older and stay older for longer, it’s this demographic that will fuel the next wave of online advertising spend.