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Online advertising spend forecast to outstrip national newspapers
[May 30, 2006]

Online advertising spend forecast to outstrip national newspapers

(The Irish Times Via Thomson Dialog NewsEdge)The internet will this year overtake national newspapers to become the UK's third-biggest advertising medium by spend, according to authoritative forecasts.

By the end of next year, internet advertising will close the gap on regional newspapers, the number two medium by spend, but will still be well short of tele-vision, the biggest outlet in the GBP12 billion (17.5 billion) a year UK media advertising market.

The projection underlines the pace of growth in internet advertising and the challenge to businesses reliant on traditional advertising revenue.

Excluding internet spending, total UK media advertising would be in recession with television, national and regional press all reporting revenue declines this year, it said.

The report comes from GroupM, a WPP holding company that drew on data from the group's media buyers Mindshare, Media-edge, Mediacom and Maxus, which together buy and plan more than 30 per cent of global media advertising. It estimates that the internet will take 13.3 per cent of the total UK media advertising market - excluding areas such as direct mail, public relations and market research - in 2006. National newspapers will take 13.2 per cent.

Although the difference between the two is slim and forecasts can be wrong, Adam Smith, futures director at GroupM, said analysts had, if anything, underestimated internet growth.

"Every year, people think the internet must slow down because the growth rate looks high, but it keeps going.

"If anything, there has been some low-balling of the internet estimates. Overtaking national newspapers is another milestone," Mr Smith said.

Search advertising, where businesses pay to reach customers trawling for information on websites such as Google, accounted for more than half of UK web advertising in 2005. This sector is predicted to grow this year.

The 39 per cent forecast rise in internet advertising contrasts with a 9 per cent fall in national newspaper advertising revenue.

GroupM predicts that by the end of next year, national newspapers will have seen their share of UK media advertising fall to almost two-thirds of its share in 2000. Newspapers have tried to counter this loss by investing in their own websites and buying, at valuations well above mainstream publishers, online businesses, particularly those which have captured highly lucrative classified advertising.

Advocates of print point to its engagement with readers and ability to reinforce branding campaigns. But the medium's declining ability to reach, and therefore sell, to younger audiences prized by advertisers is a perennial concern.

Mr Smith said while all parts of the newspaper market struggled to retain circulation, the "red-top" tabloid national dailies were being squeezed the hardest.

GroupM said that commercial TV was in its "worst year since 2001"- the year there was a media downturn after September 11th.

It forecast a 2 per cent decline this year in UK TV advertising revenues - not adjusted for inflation - and a flat performance in 2007. It calculated that ITV1, the UK's biggest advertising-funded television channel, would experience an 11 per cent decline in revenue this year. - (Financial Times service)

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