Agencies cautiously optimistic about display and search budgets

Online ad spend will continue to grow in 2010 as confidence returns to the sector, according to the UK’s top media agencies, although it won’t be until the second half that budgets rise significantly.

New media age’s annual survey of the leading media agencies from the nmaTop 100 Interactive Agencies guide – accounting for more than £800m of annual spend – found display budgets are set to grow by 6% and search budgets by 9% as online continues to buck the trend of declining ad investment.

Despite this, the figures are down on last year’s survey, which predicted a 10% display increase and 17% search increase (nma 18 December 2008).

Paul Constantine, MD of Zed Media, said 2010 will be signified by a cautious first six months before a relaxing of budgets in the second half.

“I’m not sure everyone is spending more yet, it’s more that they’re cautiously optimistic that we won’t see any more drops,” he said. “It’s fragile. I think everyone’s waiting to see how the first quarter of the year pans out, but I’m sure money will be released in the second half if revenues start to come through.”

A key area for display growth in 2010 is video, with the emergence of services such as SeeSaw and Hulu, as well as the evolution of existing properties like YouTube into a viable platform for long-form content, with agencies predicting a potential goldrush of ad spend.

Paul Frampton, Media Contacts MD, said, “Video will be big in 2010. This year all the on-demand platforms got huge numbers of viewers but there was a lack of supply. Next year we’ll see 25% growth.”

Likewise, Jim Gyngell, head of online communications operations at BLM Quantum, said, “The video-on-demand market will see a sizeable increase, only capped by the number of suppliers. Agencies have a real appetite for premium video content, and if the supply is there it could grow by 30%.”

The rollout of improved video tools will be a major catalyst for growth. This includes BARB’s commitment to including more measurement of on-demand playback – such as games consoles, PCs and set-top boxes – as it evolves its measurement metrics ( 25 November 2009).

Jo Lyall, joint head of the Invention group at Mindshare, said, “More money will go into integrated work like video, partnerships and content. BARB and Nielsen working to provide online video data to measure uplift and reach will help increase spend.”

Ad exchanges, which have been one of the big growth sectors in 2009, including the launch of Google’s DoubleClick Ad Exchange (nma 23 July 2009), will also become a focus for client spend over the next 12 months, according to Stefan Bardega, MD of MediaCom’s Beyond Advertising unit.

“The important thing next year will be the inventory going through ad exchanges,” he said. “It might not be a massive percentage but everyone will be testing them. A lot of people are saying it’ll change the way media is traded.

“It’s appealing because it’s an auction model so it isn’t a fixed price and you only pay what media is worth,” Bardega added. “But you lose any benefit of scale, as with search.”

Social networks will help growth, with all the major platforms currently launching new ad opportunities. Earlier this month MySpace launched its much-anticipated MySpace Music offering (nma 3 December 2009), while Facebook has opened its advertising API to encourage developers and agencies to create innovative revenue opportunities (nma 26 November 2009).

However, agencies are awaiting more rollouts of Twitter’s new commercial opportunities, the first of which was revealed this week ( 15 December 2009).

Media Contacts’ Frampton said, “Social media spend will grow by about 30%, driven by Twitter developing a commercial model and Facebook opening up more.”

But Mindshare’s Lyall said there needs to be more definition of what social media ad activity means.

“Social will grow next year but that’s hard to track as it depends on what people mean by social media,” she said. “It can mean making content shareable or investing in a year-long presence on Facebook or Twitter.”

Search will be boosted by competition from Bing and social networks, as well as the proliferation of mobile devices that provide high-quality web experiences.

Mark Mitchell, group head of search and affiliates at OMD, said, “Search is search, what changes is where you access it from. There’ll be an increase as more people use mobile devices.”

Charlie McGee, MD of Carat Digital, said search spend will increase as brands are given a truer picture of how search relates to other media activity, through improved tools such as Microsoft’s Engagement Mapping.

“These will make the relationship between standard digital media and search clearer. We can increase spend on keywords that once appeared to underperform but are actually a significant part of the user’s journey,” he said. “We’re seeing clients become more bullish about committing budget to search as it continues to deliver ROI, so it’s easy for marketers to show their board the value of this type of digital media.”

Chris Broadbent, MD of Brilliant Media, said the trend for integrated media agencies will be that online becomes even more valuable.

“Online is now 40% of our billings and we see that continuing at the expense of traditional media,” he said.

Agencies taking part in the survey included Agenda21, BLM Quantum, Brilliant Media, Carat, Media Contacts, MediaCom, Mindshare, MVi, Neo@ Ogilvy, OMD Group and Zed Media.

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