H UK online adspend study

1. Introduction

Agenda 1.Introduction 2.Study methodology 3.Market background and trends 4.UK online adspend – headline results 5.Online in context 6.The digital media mix 7.Industry categories 8.Summary 9.Looking ahead… 10.Questions

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

2. Methodology

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 130 companies have participated in the survey 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 A brief history…

Research participants Accelerator Acxiom Ad2-one Adept Scientific AdLINK Ad Revenue AdSales4U Advertising.com Adviva AOL Affiliate Window Ask Associated Northcliffe Digital Autotrader BBC Worldwide Bloomberg Blue Lithium BMJ Bolt Blue Bounty BSkyB Buy Association Buy.at (Perfiliate) Channel 4 Chinwag Chrysalis Radio Classic FM CNET Conde Nast Confetti Dennis Interactive DGM Drive PM Dixons Double Fusion E-circle Economist EDR EMAP E-Type Euroclick Everyclick Exchange and Mart Faversham House Group Financial Times Find.co.uk Findaproperty Fish4 Five Flirtomatic Friends Reunited Future Publishing GCap Radio Global Radio Interactive Google Guardian Habbo Hachette Fillpacchi Handbag Haymarket Hello IDG Independent I.E.T (Institute of Engineering and Technology) IPC Media IPT i-Points Is4Profit ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Johnston Press Last FM Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster MSN My Space National Magazines Net Communities Netrecruit News International Orange Oridian Overture Pigsback Prime Location Property Finder Real Media Reed Business Information Reuters Right Move Scotland Online Sift Simply Media TV SRH Skupe Tacoda Teamtalk Telegraph Tesco Tiscali TMN Media Tradedoubler Trinity Mirror UK Net Guides UKTV Unanimis Upmystreet U Target Valueclick Viacom Brand Solutions Vibrant Virgin Media Virgin Radio Wallpaper* WME Workthing Yahoo! Yell …Plus further recruitment sites, courtesy of WARC Representing thousands of UK websites

3. Market background and trends

Doom and Gloom!

Media scare stories..

Number of Internet Users (Used in last month) Source: BMRB’s Internet Monitor, May 2008

Large majority of broadband services are now above 2 MB Base: All respondents with a broadband connection at home. Q: Do you know the connection speed of your home broadband package? (May ; May ) Source: BMRB Internet Monitor May 2007; May % have used wireless broadband at home in the last month (May 2008)

Where were we this time last year?.. Online adspend £1.3bn in H The medium grew by 41.3% from £917.2m in H Online overtook Direct Mail Continuous quarter on quarter growth

4. UK Online Adspend Study Results for the H Prepared by PricewaterhouseCoopers for the IAB

£1,682.5m market in H An increase of £348.2m year-on-year Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

21% increase New contributions in H represented £97.2m H vs. H on a like for like basis Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

Online advertising reaches £853m in Q1 08 £ millions Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC ‘01 ‘03 ‘02 ‘04 ‘05 ‘06 ‘07 ‘08 A seasonal “dip” in Q2 appearing?

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

H market share 18.7% (14.7% in H1 2007) % share of revenues for January to June 2008 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. Total advertising market £8.98bn

Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / WARC: WARC estimate for directories. Online continues to drive market Total advertising market growth = -0.7% Year on year growth for H1 2008

Market Share Online’s share growth accelerates to 19% Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

Online closes in on the top two £ 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

Online almost reaching Press Display total £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. H Directories are estimated

Summary – H Online advertising growth supports the entire media market Internet advertising reaches £1,682.5m in H Online achieved a share of 18.7%, up 4 points from H (14.7%) The market grew on a like for like basis by 21% year-on-year, maintaining growth in a difficult climate

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

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. H total £1,682.5m % share of revenues for the H The digital media mix

£ millions +16.3% +30.2% +28.7% 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 online formats continue to experience growth

The digital media mix 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. Full year total £1,682.5m £277.6m £10.8m £5.1m £7.6m £7.2m £3.9m £14.6m £7.1m £6.1m £194.8m £161.4m £5.4m £981.0m % share of revenues for the H1 2008

The digital media mix £ 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 Year on year comparison * * First time pre-post roll and display affiliates included in survey. Potentially under-reported *

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

Advertisers like accountability “I think you’ll see some people moving their money away from marketing streams that are less accountable, and moving into digital areas – search is a great example of that… in terms of capping the dollars you spend but making sure that every dollar is absolutely accountable.” Emma Jenkins – Head of Interactive Marketing, Procter & Gamble

£m Source: Internet Advertising Bureau / PricewaterhouseCoopers Growth in all classifieds

Classifieds led by key players

Display: formats dominated by banners & rich media £m Source: Internet Advertising Bureau / PricewaterhouseCoopers * First time pre-post roll included in survey. Potentially under-reported *

Embedded formats growth greater than total growth £ 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 +36.3% -47.6% -11.7% -23.3% -54.0% -79.9%

41% of gross display spend through networks

Formats summary – H With revenues of £981m in H1 2008, search maintained its dominant position YoY, display was up 16.3% to £333.8m while search increased by 28.7% and classifieds were up by 30.2% to £361.6m Core “embedded” display rose 36.3% YOY Classifieds: recruitment increased by 37.1% to £194.8m and other classifieds grew by 23.0% to £166.8m Source: Internet Advertising Bureau / PricewaterhouseCoopers

7. Industry categories

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC 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 37% of online revenues in H Recruitment continues to lead the market Based on 37% of total ad spend – largely display And classifieds

Sector Market Shares 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 37% of online revenues in H Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC Based on 37% of total ad spend – largely display and classifieds

Recruitment continues to take the highest share and is also the share point winner (+8.2 points) Automotive retains second place for the third wave running Property overtakes Finance and Technology for the first time to take the third spot Other categories have lost share at the expense of core classifieds categories Industry sectors summary – H1 2008

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC 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 87% of online display revenues in H NB – an immaterial amount of these figures are classifieds Isolating display gives a different picture Based on 87% of total display ad spend

8. Summary

Figures make an impact once again!

Summary Online ad spend continues growing 21% year-on-year (on a like-for-like basis) to reach £1,682.5m in H Online achieved a share of 18.7%, up 4 points from H (14.7%) Online closing in on Press Display

Summary Search (+28.7%) and display (+16.3%) both experienced impressive growth in revenue in the current market, with embedded formats (+36.3%) performing way ahead of the total growth. Classified (+30.2%) performed particularly well Record breaking quarter in Q1 08

9. Looking ahead

Online draws level with total Press display £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

Could online overtake TV next year? £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

£ Our current forecast range for 2008 is… £3.2 £3.3bn £2.81billion in 2007

All of the 130 companies taking part, representing thousands of websites and to Our thanks to… Paul Rosen, Executive and Paul Pilkington, Director Colin Macleod, Research Director

10. Questions For more information