±±¾©Èü³µpk10

Yet, hidden spend, such as affiliate marketing, not included in the IAB research conducted by PricewaterhouseCoopers (PWC), could show online's rising star to be even brighter.

IAB chief executive Phillipson explains: "We know there is an additional 15 per cent of media spend out there that we are unable to track."

Last year, online media spend leapt 66 per cent and its share of advertising rose to 8.4 per cent in the second half of 2005. This brought overall web spend to £1.4bn; £735.9m in the second half.

"Spend is hurtling to £2bn very quickly. It won't be long before it's a 10 per cent medium," adds Phillipson.

According to the IAB study, the web has left radio, cinema and outdoor behind. It is now starting to dent direct mail and press classifieds, which fell 3.9 per cent and 5.1 per cent year-on-year respectively, according to the Advertising Association.

In fact, Phillipson said the dramatic rise in web ads had driven a 2.5 per cent lift in the overall market at a time when spend on all other media combined has fallen by £200m year-on-year.

Affiliate spend

However, John Baker, managing partner, at OgilvyOne London, pointed out that this decrease is on spend of some £16bn and it's only a small percentage.

The figures tracked by PWC focus only on media, which includes search, web classifieds, format ads, sponsorship and tenancies. But, aside from the inclusion of affiliate marketing firm TradeDoubler, the report excludes marketing spend on affiliates and aggregators, which is growing rapidly.

According to E-consultancy, affiliate marketing accounts for eight per cent of online media spend and is one of the fastest growing channels, having generated £1.4bn in sales for e-tailers in 2005.

Nor does the PWC report track spend channelled through shopping comparison web sites such as Kelkoo and Price-Runner, which was worth up to £140m in 2005, according to E-consultancy.

This total is based on the combined income of the major retail-focused comparison engines, but even this figure excludes travel and finance, so actual spend on comparison sites is likely to be a lot higher.

Bartholomew Day, marketing manager at Lloyd's TSB Insurance, says affiliate and aggregator spend can account for two-thirds of his online marketing budget for some brands.

"Affiliates and aggregators are the most cost effective form of advertising for us," he says.

Charmaine Oakley, digital planning director at Zed Media, adds: "Some of our direct response clients are spending nearly as much on their affiliate marketing as their search advertising, especially for finance where they're very ROI-focused. BT, which is very focused on ROI, probably doesn't spend that much, but affiliate marketing is a massive channel for it."

Bigger picture

She adds: "I've estimated in the past that affiliate marketing could account for up to 10 per cent of online direct response advertising in big financial companies. That's a bit of a finger-in-the-air measurement, but it is very large."

The IAB figures also exclude spend on mobile, iTV and emerging channels like podcasting and blogging.

Another area that is not being tracked is creative spend and production costs, such as web build, consultancy and search engine optimisation.

Most web campaigns include site development, be it landing pages for paid-search listings, new pages on the main brand web site or a separate campaign microsite.

"This is often accounted for in development budgets (IT or marketing department expenses), which means the full amount that companies are dedicating to online is increasing at a faster rate then the IAB figures indicate," Baker points out.

But, even if this extra spend were added to the IAB figures, it still would not reflect the full impact of online. There is a whole realm of user-generated content, like blogs and community sites, that is influencing public opinion.

"Online is completely changing the face of marketing per se," says Phillipson.

"We're looking at paid-for media with search E and classified and display, but actually there is a lot more out there that can influence consumer decisions," he explains.

Information source

Phillipson highlights community sites such as MySpace.com and FaceParty.com, where users exchange views: "Online can influence decisions in two shakes of a lamb's tail in a way that has never been possible before."

It also provides an information source for advertisers to discover what people are really saying about their products or brand.

Phillipson thinks advertisers and agencies will have to employ specialists in web blogging, podcasting or community sites, who understand how to tap into user-generated channels without being intrusive.

He adds: "I know Vodafone is checking all its blogging feeds, and going on Technorati every day, and looking at who or what it ought to respond to, and, in fact, building communities who can help with its research and even product development."

Zed's Oakley has also noticed rising interest in niche areas like viral and in-game advertising. Viral is hard to quantify because it is not a media buy, but it still has a big impact. She cites mobile as another area everyone is talking about, with the arrival of 3G: "All the big sales houses like ITV and Channel 4 are heavily selling their mobile formats."

New budgets

With Phillipson predicting that online spend will reach £2bn and advertisers turning their attention to newer digital channels, where is all the extra cash coming from?

Baker thinks spend is mainly coming out of new budgets and doesn't represent a decrease for other channels. He says big brands are holding their TV and print budgets stable as they don't want to lose share of voice in traditional media channels.

However, an area that Baker believes is suffering is directories and local press as small businesses in particular switch their budgets to search. "They have invested aggressively in it because it works," he adds.

Zed's Oakley also finds extra money is being moved out of directories and into search.

This growth online shows no sign of abating as client confidence improves.

The IAB, which is considering extending its remit to mobile, hopes to boost growth further by offering a definitive online population survey by the year end. This will establish how many people use the web in the UK plus their demographic and usage profile.

"Armed with that truth, media agencies will be able to weigh surveys and planning tools like Nielsen//NetRatings against it to gain a better picture of reach and frequency when planning campaigns," says Phillipson.

"One day, clients might not talk about reach and frequency - it might be about engagement."

IAB 2005 FIGURES AT A GLANCE

- Online ads were worth £1.4bn in 2005

- This represents a 65.6 per cent increase on 2004's spend

- Growth compares with an increase of 5.8 per cent for outdoor and 3.6 per cent for TV. All other media saw a decrease in media budget share

- Online's share of the market was 7.8 per cent for 2005 K Spend on online media has overtaken cinema, which accounts for 0.9 per cent of overall media budgets, radio (3.5 per cent), outdoor (5.1 per cent) and directories (6.4 per cent).