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Analysts: Online Ad Market Worth £3.3 Billion, But Growth Halved

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imageThe UK’s digital economy is growing, but less than half as fast as it was in 2007. The IAB’s annual Online Adspend Study, conducted with PricewaterhouseCoopers, has found that UK digital ad spend grew to £3.34 billion during 2008, a year-on-year rise of 17 per cent — or £537 million — in a year that saw UK ad spend overall drop 3.5 percent. But according to the last IAB/PwC survey, digital ad spend grew by 38 percent in 2007, so growth has dropped off dramatically since then.

But while the rate of growth is slowing, online’s share of the total advertising pie is getting bigger: online accounted for 19.2 percent of all UK ad spend in 2008, compared to 15.5 percent in 2007 — according to IAB/PwC, that means online has overtaken printed newspaper and magazines, which took 19.7 percent of ad spend in 2008. Report preview (pdf).

Paid search up, display down In terms of volume, paid search listings were by far the leading contributor with 59.3 percent of all digital spend, accounting for £1.98 billion in 2008. Classifieds come next with a 21.4 percent total share and £715.2 million in revenue, but the loser was display ads, which accounted for 19 percent of the digital total and made £637.4 last year.

What about 2009?: It would be a source of much relief if UK online ad spend can sustain a growth level of 17 percent this year, but that doesn’t look at all likely. Most analysts agree that 2009 will see a year-on-year rise of between just two and 11 percent, although the AOP’s members were slightly more bullish in collectively predicting a 16 percent lift. Billetts forecasts that the online ad market will grow by just £15 million in 2009.

Reasons to be cheerful: IAB/PwC claim to have identified a clear correlation between faster broadband speeds and online ad spend: it estimates that 62 percent of the UK population had a broadband connection of at least 2Mbps in November 2008, compared to 54 percent in November 2007. I’m not sure most ad buyers would agree, but IAB estimates that online is the country’s second-most consumed medium after TV. The report says the rise of ad networks — responsible for handling 44 percent of display ad revenue — has also been a big boost.

European growth: Across the continent, IAB Europe (via reports that online ad spend grew to