UK Internet ad spend up 21 percent, overall market down

LONDON (Reuters) - Spending on Internet advertising in Britain grew 21 percent in the first half of 2008, propping up the total ad market which fell as cash-strapped companies cut back on marketing, a key report said.

The Internet Advertising Bureau said on Monday expenditure on the Web increased to 1.68 billion pounds ($2.95 billion) in the first six months, while the total advertising market was down 0.7 percent year-on-year.

The total market would have been down 4.6 percent without the Internet's growth, the report said, explaining that all other major advertising mediums such as television, press and radio fell.

Analysts believe that placing adverts on the Internet can be more accountable, allowing companies to follow a consumers action and see if they click through from the advert to purchase a product.

"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," said the IAB's Guy Phillipson.

"The growth in Internet advertising spend is beating all expectations as advertisers look to maximize 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."

Phillipson told Reuters that online advertising spend could exceed 3.2 billion pounds in 2008.

The British report, which is produced by the IAB, PricewaterhouseCoopers and the World Advertising Research Center, said online spend had exceeded expectations, increasing its market share to 18.7 percent, only 3 percent behind TV.

Advertising spend on search engines grew by 28 percent year on year, taking a market share of 58.3 percent of the total online spend, while Internet display spending rose 16.3 percent.

The report said display advertising was boosted by formats such as video and banner adverts and the growing confidence that the Internet was able to engage consumers, build brands and drive sales.

The report revealed that technology was the strongest spending sector within display advertising, with a 17.3 percent market share, followed by finance, entertainment and media, and recruitment.

(Editing by Hans Peters)