The UK Office of Communication, Ofcom (www.ofcom.org.uk), has just reported that online ad spending in the UK reached $5.3 billion. The figure in itself may not tell you much but it represents a huge 40% increase in 2007 from 2006. It now counts for 19% of all advertising across the UK.
Interesting enough, many others anticipated the shift in the ad spending structure and preached that online would, of course, overtake TV sooner or later – but they were wrong in regard to the timing. Take, for example, the “This Year, Next Year” report from GroupM (WPP Group): it predicted that 2009 would be the year of the big swap in the UK and they were wrong for only 2 years.
While this is great news for those of us working in online operations, there are many aspects to consider before jumping to conclusions:
– not all markets develop at the same pace, the Brits may have ditched TV ads for online but for now it’s just them;
– intensified competition in the online sector could likely lead to lower CPMs and lower profit margins;
– same competition will force content owners and networks to develop increasingly sophisticated ad products and user-targeting capabilities, in an attempt to make the most of their monetization opportunities;
– in-group and/or in-network cannibalization.