FMCGs to fuel £160m boost to online ad spend in 2007

WPP investment arm Group M is predicting £160m online growth next year, which it says will begin a second phase of internet advertising, with FMCG brand advertisers finallly embracing the medium.

Group M's report, published this week, estimates that internet advertising will jump by 36% in 2007, a massive increase on its forecast of 26% in June.

FMCG advertisers will join the bandwagon next year, the authors believe. Currently, the sector accounts for just 5% of online ad investment, but this could rise to 13%.

If the FMCG brands committed 10% of their budgets to online, the report says, it would mark a £200m investment. Group M predicts big advertisers to try out the medium will be in food, cosmetics and household stores, with Unilever's deodorant brand Lynx expected to be among those leading the increase.

Traditional brand advertising is expected to move out of traditional media, to see if it can "work harder" online. The reports says: "Every pound withdrawn from traditional media, either to be saved or spent online, where supply is in handsome surplus, exerts more deflationary pressure on the total market. And if online proves more productive, advertisers have the option of investing less." It makes grim reading for traditional media. Group M has downgraded its expectations of a 2% rise in media ad revenues in 2006, forecast in June, to just 1%.

Its vision for 2007 sees a 5% increase, although this will be driven entirely by the growth in online, and sponsorship for the 2012 Olympic Games, commencing next year.

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