UK online advertising rose in 2006

New report finds that UK companies increased their online advertising spend last year, while cutting back on TV and radio ads.

Spending on internet advertising rose almost 20% last year to £235m compared with a year ago. The figures exclude popular search and classified sites like Google and Yahoo due to technical problem of measuring it accurately.

Meanwhile, spending on television fell 4 per cent in a market where overall media spending was flat on the year before at nearly £11bn, Thomson Intermedia said in its annual report.

"The protracted fade of TV advertising and the inexorable rise of online look set to continue," Thomson Intermedia Chief Executive Sarah Jane Thomson said in a statement.

UK retail, dominated by the campaigns of supermarket giant Tesco and Marks and Spencer, remained the biggest ad spenders, racking up nearly £2bn in 2006. Finance came next followed by media and entertainment companies.

Numis analyst Paul Richards said advertising on the internet tended to be classified, or search advertising, which would most likely have previously been placed with newspapers.

However he said the UK advertising industry was currently also being affected by television audiences fragmenting due to the growth of smaller, niche digital channels and problems at ITV, the UK's biggest commercial broadcaster, which lost viewers and its chief executive in 2006.

"The UK advertising market, because of cyclical factors, is more challenged than most other markets globally," he said. "But if you look at where we're seeing the advertising drop, it's the big broadcasters like ITV1 and Capital Radio where the audience is migrating to more fragmented areas."

Underlining how advertisers are seeking quick financial returns for their advertising spending rather than relying on a traditional advertising campaign lasting years, spending on national newspapers and consumer magazines also grew six per cent, according to the Thomson Intermedia data.

Meanwhile, radio advertising took the biggest hit, falling eight percent year-on-year to £300m.

Yet Thomson Intermedia warned the rapid rise in online advertising was expected to slow slightly, as demand starts to outstrip the supply of powerful internet sites with big consumer audiences.

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