Internet marketing spend forecasts for 2009

With the world in the midst of a global recession, businesses are tightening their belts as much as possible and digging in for what could be a cold, harsh winter and a bleak 2009. Despite the pessimism, growth in Internet marketing continues to rise as businesses realise the importance of cementing their online presence for the eventual upturn in the economy. This is coupled with a decline in spending on traditional advertising mediums such as TV and radio.

The Internet Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) conducted a study into Internet marketing spend in the UK, including SEO and PPC spend, and found that Internet marketing in the UK was worth a total of £2,812,600,000 in 2007, which was up 38% on the previous year. Online advertising was worth 15.3% of all advertising spend in the UK that year, a rise from 11.4% in 2006.

Furthermore, PricewaterhouseCoopers predicted spend for Internet marketing going on to 2011 in a report entitled the ‘Global Media Outlook Report’.

2008 £3.6 billion
2009 £4.3 billion
2010 £4.9 billion
2011 £5.4 billion

The figures produced by PwC and IAB have been forecast to underestimate Internet marketing spend in the UK.

Internet market research firm E-consultancy has estimated that of the £3.6 billion that will be spent in 2008 on Internet marketing, £2.75 billion of that will be on SEO and PPC budgets. This represents a growth of 24% on the previous year.

Of that spend; E-consultancy believes that £2.42 billion will be spent on paid search (such as Google Adwords) this year – a rise of 23% on last year. Search engine optimisation (SEO) will account for £330 million worth of marketing budgets in 2008 – a massive increase of 32% on 2007.

According to Chris Lake, the editor in chief at E-consultancy:

Search spending is continuing to increase at a healthy pace, although the growth rate will not match the increases seen over the last few years.

There are various reasons for the lower growth rate. Economic concerns will affect the overall ad industry, and search isn’t entirely immune from a dip in budgets. Marketers and agencies are savvier than ever, so scope for growth in ROI is limited. And growth in consumer internet usage is flattening out. But the sector is certainly more robust than other media channels that have a less measurable return on investment, and should continue to grow for years to come.

Budgets look set to increase into 2009 as well, with 63% of companies surveyed by E-consultancy saying that they planned to increase their PPC budgets next year, while 61% were looking to increase their SEO spend.

The prominence of Internet marketing has been magnified by the drops seen in conventional advertising, with TV and radio advertising falling this year. Indeed, without the increase seen in Internet marketing spend, taking its share of marketing spend to 18.7%, the total spent on advertising in the UK would have dropped by 4.6% in the first part of the year.

As it stands however, Internet marketing spend stands just 0.6% behind press advertising and just 3% behind TV advertising.

The reasons for the success are quite apparent, with a total of 31.6 million using the Internet in the UK this year (Source: BMRB Q2 2008) the market for online advertising has grown year-on-year. Also, the demographic split of Internet users in the UK is an accurate reflection of the UK as a whole, with a 52%/48% split between male and female users. 21% of Internet users are between 25 and 34 and the UK is seeing increasing Internet usage from the over 50s, who account for 30% of the total time the country spends online.

The IAB’s chief executive office, Guy Phillipson, stated:

Online is not immune from the economic downturn, but while other sectors see falls in expenditure, the internet is still experiencing an incredible increase and is propping up the entire advertising market.

The growth in internet advertising spend is beating all expectations as advertisers look to maximise their budgets, and take advantage of new display advertising formats such as video. They are also increasing their investment in paid-for search marketing because it delivers measurable returns on investment.

With TV, press and radio advertising on the decline, Internet marketing, including PPC and SEO, looks set to become the biggest advertising sector in the UK in the next two years.

Darren Jamieson
Senior Creative Developer