2. Welcome Richard Eyre, Chairman, IAB Guy Phillipson, Chief Executive, IAB Laurence Bird, Head of Planning & Research, IAB Nicki Lynas, Manager, Entertainment and Media Practice, PwC

3. UK Online Adspend Study Results for January to June 2007 Prepared by PricewaterhouseCoopers for the IAB

4. Background Census of all major UK online media owners Official Advertising Association figures since 1997 Information collected each half year Analysis available by Format Industry category

5. Agenda Study methodology Market background and trends UK online adspend – headline results Online in context The digital media mix Industry categories In summary Questions & answers

6. Methodology

7. A brief history … The IAB has been working with PwC since 1997 to survey the value of the online advertising market. We have run projects in Europe and North America to assess the size of the interactive media markets. These figures have become the industry standard for measuring advertising spend and in the UK are now used by the Advertising Association. 111 companies have participated in the survey representing thousands of websites. Reported figures are not adjusted to account for other organisations that have not participated. Total advertising revenue is reported on a gross basis. The figures are drawn up on the basis of site declaration. They cover thousands of UK websites, but by no means all.

8. Research participants Acxiom Ad2-one Adept Scientific Adlink Ad Revenue Advertising.com Adviva AOL Affiliate Window AskJeeves Associated New Media Autotrader BBC Bloomberg Blue Lithium BMJ Bolt Blue Bounty BSkyB Buy.at (Perfiliate) Channel 4 Chinwag Chrysalis Radio Classic FM CNet Condenast Confetti Dennis Interactive DGM Dixons Double Fusion E-circle Economist EDR EMAP E-Type Euroclick Everyclick Future Publishing Faversham House Group Financial Times Find.co.uk Findaproperty Fish4 Five Friends Reunited GCap Radio Google Guardian Habbo Hachette Fillpacchi Handbag Haymarket Hello Independent IPC Media IPT i-Points ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Johnston Press Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster MSN My Space National Magazines Net Communities Netrecruit News International Orange Overture Pigsback Property Finder Real Media Reed Business Information Reuters Right Move Scotland Online Sift SRH Skupe Teamtalk Telegraph Tesco Tiscali TMN Media Tradedoubler UK Net Guides UKTV Unanimis Upmystreet U Target Valueclick Viacom Brand Solutions Virgin Radio Wanadoo WME Workthing Yahoo! Yell …Plus further recruitment sites, courtesy of WARC Representing thousands of UK websites

9. Market background

10. A quick reminder of the 2006 figures…

12. £2,015.8bn market in 2006 An increase of £649m year-on-year

13. 41.2% increase On a like for like basis New contributions in 2006 represented £86.4m 2006 vs. 2005

14. Internet 12.4% Second half market share hits 12.4% A new world record Total advertising market – H2 06 £8.8bn Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated. Largest share anywhere in the world

15. Online adspending overtakes national press

16. What industry forecasts said… 2007 Growth Sources: Advertising Association / WARC Forecasts, 2006 Group M forecasts, 2006 Interdeco Ad Barometer, 2007 PricewaterhouseCoopers Global Entertainment and Media Outlook - 2006-2010 UBS Investment Research: UK Advertising, Oct 2006 Zenith Expenditure Forecasts, Sep 2006

17. OFCOM Report Women take over…

18. Empty nesters go surfing… One quarter of all Britons online are over 50 and 30% of total time spent on the internet is by the over 50’s.

19. Young women take over… Women 25-34 now spend more time online than men in the same age group.

20. The rise of social networks

21. Over 150m videos served daily on YouTube

22. Broadband fuels rise of video advertising

23. Millions of people Over 32m people now online used in last 12 months Source: Gfk NOP World, To December 2006 Dec 1997 Dec 1998 Dec 1999 June 1997 June 1998 June 1999 June 2000 Dec 2000 June 2001 Dec 2001 June 2002 Dec 2002 June 2003 Dec 2003 June 2004 Dec 2004 June 2005 Dec 2005 Jun 2006 Dec 2006 67% used internet in last 12 months

24. Source: BMRB Internet Monitor Nov 2006 Base: All who have used the Internet at home on a computer in the last month Broadband access at home

25. Half of home broadband users services are now above 2 MB Base: All home broadband users who knew their speed of connection (Aug 06 - 359; Aug 07 - 396) Source: BMRB Internet Monitor Aug 2006; Aug 2007 38% have used wireless broadband at home in the last month Q. What is the connection speed of your home broadband?

26. Weekdays Saturdays Sundays Source: BMRB Internet Monitor, August 2007 Base: All Internet users aged 15+ Online second only to TV % of media time for all internet users

27. UK Online Adspend Study Results for the first half of 2007 Prepared by PricewaterhouseCoopers for the IAB

28. £1,334.3m market in the first half of 2007 An increase of £417.1m year-on-year

29. 41.3% increase On a like for like basis New contributions in H1 2007 represented £53.3m First Half 2007 vs. first half 2006

30. Online advertising nearly £700m in Q2 £ millions Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC ‘01 ‘03 ‘02 ‘04‘05‘06 ‘07

31. Online in context … Breaking market trends in the UK ad industry

32. Source: PricewaterhouseCoopers / Internet Advertising Bureau / The Advertising Association / Radio Advertising Bureau / WARC Internet 14.7% First half market share nears 15% January to June 2007 Total advertising market £9.1bn Largest share anywhere in the world

33. Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / WARC WARC estimate for directories. Online drives the whole market Year on year growth for the first half 2007 Total advertising market growth = 3.1%

34. Market Share Online’s share growth accelerates Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

35. Online’s ascendancy continues £ millions Source: PricewaterhouseCoopers / Internet Advertising Bureau / Advertising Association / Radio Advertising Bureau / WARC N.B. WARC Recruitment data included from 2003 Radio Outdoor Internet Press - Display Television Press - Classified Direct Mail

36. Online overtakes Direct Mail First half 2007 £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated

37. Summary – H1 2007 Online advertising driving growth of the entire media market Internet advertising at £1,334.3m in the first half of 2007 Online achieved a share of 14.7%, up 4.3 points from H1 2006 (10.4%) The market grew on a like for like basis by 41.3% year-on-year, maintaining the strong growth of previous waves Online surpasses Direct Mail (11.8%) by almost 3 share points.

38. The digital media mix The developing mix of ad products

39. The digital media mix % share of revenues for January to June 2007 Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Half year total £1,334.3m

40. £ millions +33%+72% +44% Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. The digital media mix All groups of formats have experienced strong growth

41. The digital media mix % share of revenues for January to June 2007 Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. £203.6m £12.2m £9.8m £35.6m £9.3m £16.6m £7.4m £142.0m £134.5m £1.1m £762.3m

42. The digital media mix Year on year comparison £ millions IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

43. Strong growth of Search continues £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

44. We’ve become searchaholics! £1.4bn medium in UK

45. Search is the gateway to brands In July 2007 28m people visited a search engine and 26.2m of these clicked through onto a site. This equates to 90% of the internet population visiting a search engine and 83% clicking through. There were 1.4bn search queries carried out in the UK in July 2007. On average, there are 3.3 click throughs per search session. Search revenues in the first half of 2007 reached £762m Source: Nielsen Net Ratings, MegaView Search UK, July 2007, Home and Work, Netview July 2007, IAB/PwC Online Ad Spend H1 2007

46. Growth in further classifieds £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

47. Classifieds = consumer pull + value for marketers

48. Display: breadth of formats £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

49. All display formats are up apart from tenancies £ millions IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC +47% +44% +316% +57% +27% -30%

50. Formats summary – H1 2007 January to June 2007 Revenues increased across all formats, except for tenancies and solus e-mail With revenues of £762.3m in the first half of 2007, search maintained its dominant position YoY, display was up 33% to £287m while search increased by 44% and classifieds were up by 72% to £277.7m Classifieds: recruitment increased by 38% to £142m and other classifieds grew by 129% to £135.6m

51. Industry categories

52. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC Recruitment sector continues to lead the market in the first half of 2007 IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 44% of online revenues in H1 2007.

53. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC Sector Market Shares: Automotive overtakes Finance to rank #2 IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 44% of online revenues in H1 2007.

54. Industry sectors summary – H1 2007 Recruitment is the share point winner (+5.3 points) and retains the pole position, Automotive overtakes Finance for the first time Telecoms (+2 points), Business and Industrial (+1.9 points) and Property (+1.4 points) strengthened their positions whilst Finance (-3.9 points) and Technology (-3.2 points) showed a decline. Share for Consumer Goods, though still fairly small, increased by 0.7 point, while Retail remained static. There is still room for much growth in these categories.

55. Overall Summary

56. Overall summary Online ad spend leaps by 41.3% year-on-year (on a like-for-like basis) to reach £1,334.3m in the first half of 2007 Almost £2.5bn (£2,433.0m) was spent across the twelve months to June 2007 Online achieved a share of 14.7%, up 4.3 points from the first half of 2006 (10.4%) Online surpasses Direct Mail (11.8%) by almost 3 share points.

57. Search and display and both experienced impressive growth in revenue. Classified performed particularly well. Twenty record-setting quarters in succession While Recruitment is the share point winner (+5.3 points) and retains the pole position, Automotive overtakes Finance for the first time Overall summary

58. The next milestone £2.75 billion A real possibility in 2007 Approximately the size of regional press

59. Martin Sorrell in the FT “the share of UK advertising budgets spent online will rise from 14 to 18 per cent in 2007.”

60. PwC outlook is bullish “The real superstar in terms of growth in the UK market is internet advertising. This will grow to US$9.9 billion in 2011, a CAGR of 20.8%, to a point where it will account for over 30% of all advertising spend.” PwC Global Outlook June 2007 Phil Stokes, UK leader Entertainment and Media Practice PriceWaterhouseCoopers LLP

61. All the companies taking part, representing thousands of websites and to Our thanks to… Nicki Lynas, Manager and Paul Pilkington, Director Colin Macleod, Research Director

62. UK Online Adspend Study Results for January to June 2007 Prepared by PricewaterhouseCoopers for the IAB For more information info@iabuk.net 020 7886 8282

63. Question time