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

3. UK Online Adspend Study Results for the full year 2006 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. 102 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 Advertising.com Adviva AOL Affiliate Window AskJeeves Associated New Media Autotrader BBC Blue Lithium BMJ Bolt Blue Bounty BSkyB Channel 4 Chinwag Chrysalis Radio Classic FM CNet Condenast Confetti Dennis Interactive DGM Dixons 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 IPC Media IPT i-Points ITN ITV iVillage Jetix Jobs.ac.uk Jobsite Loot Lycos Manchester Online Media Brokers Memedia Miva Monetise Moneyextra Monster MSN My Space National Magazines Net Communities Netrecruit News International Orange Overture 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 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. Millions of people Online audience growing steadily Dec 1996 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 Source: Gfk NOP World, To June 2006

11. Source: BMRB Internet Monitor, Q4 2005Base: All who have used the Internet at home on a computer in the last month Broadband access at home

12. Faster and more convenient broadband access is changing the way the internet is used Base: All broadband users who knew their speed of connection (443) Source: BMRB Internet Monitor Nov 2006 A third have used wireless broadband in the last month Q. What is the connection speed of your home broadband?

13. Online second only to TV % of media time for all internet users Weekdays SaturdaysSundays Source: BMRB Internet Monitor, Nov 2006 Base: All Internet users aged 15+

14. Recent headlines

15. The biggest online Christmas

16. Plea to agencies It warns agencies they will no longer be competing solely among themselves, adding ‘Allies may become competitors, advertisers may become suppliers and agencies may become media owners ’ They suggest it is time to ditch the traditional description of ‘above the line’ and ‘direct’ for broader definitions such as ‘not-named’ for the former and ‘names’ or ‘personalised’ for the latter

17. This time last year… Online achieved 60% growth to reach 1.4bn for 2005 We predicted breaking the £2bn barrier by end of 2006… But this would mean an increase of 600m – more than the size of radio in itself. We also said overtaking National Press was a real possibility

18. 2B or not 2B That is the question

20. £2,015.8bn market in 2006 An increase of £649m year-on-year

21. 41.2% increase On a like for like basis New contributions in 2006 represented £86.4m 2006 vs. 2005

22. Online advertising nearly £600m in Q4 £ millions Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC ‘01 ‘03 ‘02 ‘04 ‘05 ‘06

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

24. Internet 11.4% Market share over 11% Full year 2006 Total advertising market £17.6bn Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

25. Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / Radio Advertising Bureau/ WARC Online drives the whole market Year on year growth for 2006 Total advertising market growth = 1.1%

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

27. 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

28. Online’s strong progress 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 - Classified Direct Mail Press - Display Television

29. Online overtakes National Press Full year 2006 £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC / Radio Advertising Bureau. Directories are estimated.

30. Summary – Full year 2006 Online advertising driving growth of the entire media market Internet advertising breaks the £2bn barrier in 2006 to reach £2,015.8m Online achieved a share of 11.4%, up almost 4 points from 2005 (7.8%) The market grew 41.2% year-on-year, maintaining the strong growth of previous waves

31. Summary – H2 2006 In the second half of the year, online advertising was worth £1,098.6m The internet’s share of all advertising expenditure actually reached 12.4% Revenues for Q4 nearly £600m – 10 times the size of Q4 2002

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

33. The digital media mix % share of revenues for the full year 2006 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 – £2,015.8m

34. The digital media mix All groups of formats have experienced strong growth £ millions +35% +45% +52% 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.

35. The digital media mix % share of revenues for 2006 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. £321.5m £20.1m £14.0m £73.2 £15.8 £9.1 £17.5m £ 215.2m £133.2m £30.6m £1,165.6m

36. The digital media mix Year-on-Year Comparison £ millions Source: PricewaterhouseCoopers / WARC recruitment classifieds / Internet Advertising Bureau 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.

37. Strong growth of search continues £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

38. Search is the gateway to brands People use search as a stepping stone to find the advertiser’s brand site More than 8 out of 10 users rely on a search engine after partially remembering a website address At least half of all e-commerce transactions (£30bn in 2006) begin with a search Search is now a £1.1bn medium Source: Yahoo! Search Marketing, ISOBAR, UDA research 2005; Google

39. Continued growth in further classified £m Source: Internet Advertising Bureau / PricewaterhouseCoopers

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

41. Formats summary – 2006 Revenues increased across all formats, except for sponsorships and interruptive formats (pop-ups) With revenues of £1,165.6m, search maintained its dominant position YoY, display was up 35% to £454m while search increased by 52% and classifieds grew by 45% to £379m Classifieds: recruitment increased by 18% to £215m and other classifieds grew by 67% to £133m

42. Industry categories

43. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC Recruitment sector continues to lead the market in the second half of 2006 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 43% of online revenues in H2 2006.

44. Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC Automotive and Technology are catching up with the perennial leaders 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 43% of online revenues in H2 2006.

45. Barclays Business

46. Mercedes A-S

47. Ikea kitchens

48. Industry sectors summary – H2 2006 The top 3 categories accounted for over half of online ad spend (52%) and continued to be led by Recruitment (+2.7 point), followed by Finance and Technology. Technology (+6.5 points) and Property (+3.4 points) strengthened their positions to the detriment of Finance (-3.6 points) and Entertainment and Media (-2.1 points). Share for Retail, though still small, increased by 0.6 point, while consumer goods declined by 0.5 point. Automotive held its position with an increase of 0.2 point year-on-year.

49. Overall Summary

50. Overall summary Online ad spend leaps by 41.2% year-on-year (on a like-for-like basis) in a relatively flat total media market £2,015.8m was spent across the twelve months to December 2006 11.4% share of advertising revenues in 2006 With a share of 12.4% in the second half of 2006, online has overtaken National Press (10.5%) by almost 2 share points.

51. Search, display and classifieds have all experienced impressive growth Eighteen record-setting quarters in succession While Recruitment retains the pole position, Technology and Property are the share point winners Overall summary

52. The next milestone £2.5 billion A real possibility in 2007 This would make online bigger than direct mail

53. Online poised to overtake direct mail £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

54. Could online overtake TV by 2010? £m Source: PricewaterhouseCoopers / Advertising Association / Internet Advertising Bureau / WARC

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

56. UK Online Adspend Study Results for the full year 2006 Prepared by PricewaterhouseCoopers for the IAB For more information info@iabuk.net 020 7886 8282

57. Question time