August 13, 2008 / 11:05 PM / 9 years ago

UK online ad spend overtakes mainstream TV

LONDON (Reuters) - Spending on online ads overtook advertising on mainstream TV in Britain last year, growing 40 percent to 2.8 billion pounds ($5.3 billion) and accounting for 19 percent of all advertising, UK regulator Ofcom said.

In its annual report on Britain's 51 billion-pound communications industry, the watchdog found that Britons spent four times as much time on computers, or 24 minutes a day, and twice as much time on mobile phones in 2007 as in 2002.

Average household spending on communications fell slightly, however, as bundled services and broadband bargains drove down prices, while more consumers shopped around and switched providers to get better deals, Ofcom said on Thursday.

"We are spending more and more time with our communications devices but spending less on them," Ofcom's strategy and market development partner Peter Phillips said in the report, which covers TV, Internet, mobile and fixed-line telephony and radio.

Online advertising spending was dominated by paid-for search, in which sponsored links appear as Internet search results. Paid-for search accounted for 1.6 billion pounds, with the rest split equally between display and classified ads.

According to Ofcom's comparative figures for 2006, the latest available, Internet advertising in Britain generated more revenue per head -- 33 pounds -- than in any other G7 country.

TV advertising was flat at 3.5 billion pounds, with digital TV channels, mainly those owned by public service broadcasters, gaining in share to make up about one-third of TV ad sales.

The share of total TV advertising revenue going to Britain's main free-to-air channels fell to 67 percent from 83 percent in 2002, as ITV lost share. Channel 4 and Five managed to maintain market share over the period, Ofcom said.

"We may not yet have felt the full impact of the economic downturn on consumer and advertiser spend," Ofcom said. "While television advertiser revenue has remained relatively steady in nominal terms, future stability cannot be taken for granted."

Britons watched TV for an average of 218 minutes per week, up from 216 in 2006. The proportion of those with an Internet connection watching TV online more than doubled to 17 percent, helped by the launch of the BBC's iPlayer catch-up service.

Among households with access to the Internet, 32 percent watched video clips on sites such as Google's YouTube, or webcasts, up from 21 percent in 2006.

Broadband penetration reached 58 percent of British households, up from 52 percent the previous year.

GREEN IN THEORY

By the end of 2007, Britain's population of 60 million had almost 74 million mobile connections, and Britons spent on average 10 minutes a day talking and texting on their cellphones, double the time they spent in 2002.

The average time spent talking on landline phones slipped to 14 minutes a day from 15, and consumer use of VoIP Internet calling services such as Skype dwindled as the cost of making landline calls continued to fall.

Overall telecoms revenue rose to 38.8 billion pounds from 37.3 billion in 2006, but average household spending on all communications slipped 1.6 percent to 93.63 pounds per month, despite a 4.1 percent rise in Britain's retail price index.

Mobile broadband usage surged, driven by sales of dongles -- small USB-like devices that connect laptops to the Web.

Dongle sales nearly doubled to 133,000 a month between February and June 2008, and about 2 million adults said they had accessed the Internet while on the move.

More than one in 10 mobile phone users accessed the Internet on their cellphone as the number of third-generation (3G) connections leapt 60 percent to 12.5 million.

Girls aged 12-15 were keener cellphone users than boys of the same age, with 74 percent saying they used their mobile phone every day, compared with 65 percent for the boys.

Among boys aged 8-11, 45 percent said they used the Internet every day, compared with 22 percent of girls of the same age.

When considering what communications device to buy, only 39 percent said they considered the effect on the environment, despite the fact that seven out of 10 respondents said they cared about environmental matters.

More than half of those questioned admitted to leaving set-top boxes on standby. Ofcom said the power used to keep all the UK's set-top boxes on standby for a year would be enough to make nearly 80 billion cups of tea.

Reporting by Georgina Prodhan; editing by Elaine Hardcastle

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