Online advertising is weathering economic storm says report

LONDON - Online ad spend is likely to fall this year in the UK as the economic downturn bites, although the sector will still post double-digit growth year on year, according to a PricewaterhouseCoopers report.

Crunch time: UK online ad spend is slowing down, but is still weathering the economic downturn
Crunch time: UK online ad spend is slowing down, but is still weathering the economic downturn

The report, "On Media: Online advertising through a downturn - weathering the storm", concludes that online is weathering the downturn by benefiting from a structural shift away from other forms of advertising such as TV and print.

Citing Advertising Association data, the report says that total UK online ad spend growth will slow to about 20% in 2008 - representing a slowdown of 18 percentage points compared with growth in 2007 of 38%.

The report adds that display spend is the online segment most vulnerable to the effects of the economic downturn "due to its focus on brand advertising and limited measurability". Display ad spend growth, though still high, is expected to be below the online market average in the UK in 2008.

The outlook for online classifieds spend in the UK is mixed, with PwC warning the outlook for property and recruitment spend is uncertain. However, online classified spend will be boosted by growth in the automotive and dating sectors, the report says.

It adds: "We would expect automotive and dating to grow in line with global growth of around 20%; recruiting and real estate may have potentially lower growth rates, but possibly with greater differences between players."

Display spend is also expected to be lower this year than in 2007, although it will still be up by between 10% and 15% year on year, PwC says.

Meanwhile, search spend in the UK this year is expected to outperform overall online advertising spend, with PwC forecasting growth of around 30% in 2008. The report said: "The search segment benefits from its ability to demonstrate clear return on investment, which will be an increasingly important feature in a downturn, and therefore we expect to see growth above the online market average."

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