Europe takes a shine to online

The latest research shows online advertising across Europe growing steadily, and taking a larger slice of the ad spend cake. This suggests marketers are starting to take the internet seriously

Online advertising’s share of media spend is reaching 5% in many European markets, as marketers start to re-orientate their focus to follow the audiences who have migrated online. These are the findings of new research by Digital Strategy Consulting on behalf of the Interactive Advertising Bureau’s European federation, supported by IAB members such as Modem Media.

European online advertising spend comfortably broke â¬4bn (&£2.74bn) in 2005 for the first time. The “Digital Europe” report collates actual and forecast spend for 2005 from the IAB in 14 countries, and paints a dramatic picture of how the landscape has recovered since the dotcom bubble burst five years ago. The “big three” markets – the UK, France and Germany – continue to dominate the ad spend league table, but online market share is rising fast in most countries, as businesses harness the power of Web advertising for branding as well as direct marketing. With audiences across the Continent spending between 15% and 20% of their “media time” online, it is no wonder marketers are paying more attention to the internet.

Online may be typically enjoying a share of between 2% and 5% of ad spend in most European countries, but this hides a more interesting insight: most businesses have yet to start advertising online at all. The figures in Digital Europe represent a simple average of an entire country – dig deeper and you’ll find companies that have become experienced in online advertising putting 20% or more of their ad budgets into the Web, while others in the same business sector have yet to dip their toes in the water.

It should be noted that, with each market collecting data slightly differently, the report’s authors are cautioning against drawing too simple comparisons between markets and countries.

The UK continues to lead the pack. Rising more than 60% year-on-year, with an online share of ad spend reaching 5.8% in the summer of 2005, it remains the largest market in Europe, and the IAB in the UK is confident that online spend in 2005 will exceed &£1bn. Here, online media spend has overtaken cinema, radio and – most recently – outdoor advertising, at a time when other sectors are relatively static.

The market share of online versus other media is the most revealing way of seeing how the use of digital has advanced. Across Europe, online share is rising, with the rate varying from under 1% to 6% in the more mature markets.

In Austria, for instance, where 65% of the population is online (representing 4.4 million users), online ad spend reached â¬17.6m (&£12m) for January to August 2005 – a 20% to 30% annual increase since 2003. In Belgium the figures look even healthier: while 52% of the population is online, 80% of household connections are broadband and 15% of users shop online; online ad spend was â¬32m (&£21.9m) in 2004, and was predicted to rise to â¬44m (&£30.1m) in 2005, equating to a 2.1% share of all media spend.

France, however, is on a par with the UK in terms of share of ad spend. There are 21.6 million online users in France – 44% of the population – and 75% of connections are broadband. The French also have a greater propensity to shop online: 59% of users. Online’s share of France’s ad spend has reached 5.9% – â¬1.1bn (&£750m) in 2005 – representing a 74% increase on 2004.

Denmark tops the charts for market share, with strong growth resulting in 6% of ad spend going online, with about â¬30m (&£20.5m) spent on recruitment and display advertising in 2005. Germany’s growth continues apace, with total online ad spend (excluding classified advertising) reaching â¬885m (&£605m) in 2005. This represents 4.4% of total German ad spend.

Spain has also displayed some dramatic advances. Online’s share of total ad spend in that country is relatively small – at 1.5% – but has seen growth of 50%. Estimates for 2005 suggest a half-yearly spend of â¬150m (&£102.6m) for online advertising, with 31% of revenues coming from the search sector

This research suggests Europe’s marketers spent about â¬4bn (&£2.74bn) in online advertising in 2005. On balance, the total market size is likely to be significantly greater because figures were unavailable for several markets and tracking the explosive growth of search advertising remains tricky. What is clear is that marketers across Europe are now realising the importance of incorporating online into their media mix.

“2005 saw search marketing go from strength to strength, and 2006 promises to follow the trend. We’ll see advances in local and mobile search in particular, and a continued focus on maximising relevancy through enhanced matching technologies.”

Stephen Taylor – Yahoo! search marketing regional vice-president and managing director

“We have clearly reached, and in many cases passed, the tipping point when it comes to interactive. As a result our clients have recognised that ‘new media’ agencies need to be firmly seated at the top marketing table, ensuring online is seriously considered within the overall marketing mix.”

Norm Johnston – European managing director, Modem Media

“This first picture of all the national markets reveals the rapid expansion of online advertising throughout Europe. The ad spend league dominance of the three largest markets continues, but total online spend, and online’s market share, are rising fast in all countries.”

Danny Meadows-Klue – chief executive, IAB Europe

“We expect in 2006 to see search becoming much more integrated with other advertising media, not only across the online platform, but also with offline campaigns. Clients are beginning to see the benefits of incorporating search into campaign planning, instead of treating it as a stand-alone medium.”

Nick Hynes – chief executive, The Search Works

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