UK Online Ads Pass Newspapers; U.S. Online Ad Spending to Triple?

According to IAB, online advertising spending in the UK in 2006 exceeded newspaper advertising spending.  This amazing fact received less attention in the U.S. than it should have.

One of the big mysteries of the past few years, for those who follow U.S. media, is how and why U.S. newspapers have been able to maintain as much share of the advertising market as they have.  Yes, business sucks for newspapers, but it doesn't suck as much as it should when one considers that the vast majority of the product is printed on wood pulp, shipped around the country in gas-guzzling trucks, and then tossed into recycling bins before it is even glanced at. 

According to Morgan Stanley figures for 2005, U.S. newspapers still generate about $49 billion in advertising revenue (including classifieds).  This compares to about $16 billion last year for Internet, $45 billion for broadcast television, and another $19 billion for cable TV.

Unless there is something structurally different about the UK market--please weigh in on this if you know--the UK statistic suggests that 1) the US online advertising market still has massive growth ahead of it, and 2) U.S. newspapers have not yet begun to feel the pain. 

Two scenarios jump to mind:  1) Online advertising triples over the next 5-10 years, to $50 billion, and/or 2) Online advertising doubles and newspapers advertising gets cut in half.  And then, of course, there's 3) Online advertising triples AND newspaper advertising gets cut in half.

UPDATE: Paul Durham weighs in:

There is something very different about the UK newspaper market - the number and importance of national newspapers. The IAB data shows internet advertising overtaking NATIONAL newspaper advertising. Regional newspapers is a separate category, and took £2.8 billion of ad revenue. So the internet still lags well behind total newspaper advertising in the UK.

Posted by: Paul Durman | April 03, 2007 at 11:15 AM

So, ignore some of what I said above.

Comments

[Paul Durman]

Henry,

There is something very different about the UK newspaper market - the number and importance of national newspapers. The IAB data shows internet advertising overtaking NATIONAL newspaper advertising. Regional newspapers is a separate category, and took £2.8 billion of ad revenue. So the internet still lags well behind total newspaper advertising in the UK.

[Paul Durman]

Henry,

There is something very different about the UK newspaper market - the number and importance of national newspapers. The IAB data shows internet advertising overtaking NATIONAL newspaper advertising. Regional newspapers is a separate category, and took £2.8 billion of ad revenue. So the internet still lags well behind total newspaper advertising in the UK.

[Henry Blodget]

Paul, Thanks. Excellent input.

[wanszezit]

Just one question, according to IAB, when online display advertising rose 35%, paid-for search increased by 52% & Online classified advertising also up 45%, the total growth was only 0.2%? How come?

[Mark Reen]

Henry,

Paul is right upto a point. The other thing worth noting is the ruinously comptetive media buying landscape in the UK and the corresponding pressure for ROI from advertisers.

Search with its immediate feedback and measurability fits the bill excellently. Copy sale data in the UK is far less frequent in the UK than in the USA (a subject increasingly of some debate) - and finally the local footprint of US newsprint protects it somewhat compared to the national distribution in the UK.

The evidence also points towards local newsprint in the UK being far more successful in migrating its revenues online that the national media.

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[Claire Homes]

Thanks for the information Paul, that was interesting to know. I have been looking into the data that the IAB use. It would be very interesting to find out if mobile ads on the newpapers online websites counts towards the IAB data or the newspapers. There are lots of newspapers that produce digital copies of the papers and have adverts on them.