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If someone had predicted 12 months ago that UK online ad spend would overtake radio, outdoor and consumer magazines, few in the industry would have believed it. But 2005 was a cracking year for digital media.

Digital channels, including search and affiliate marketing, experienced significant growth, while others burst onto the scene. Video web logging, or vlogging, podcasting and vodcasting - video podcasting - are just some of these new channels. They barely existed a year ago, but are already providing brands with new opportunities to engage users.

So, what could 2006 hold? Making predictions is never easy in the fast moving world of digital - the next Google or iPod could be unleashed at any moment and blow everything else out of the water. But one thing's clear: the growth experienced over the last several years is showing no sign of abating.

Search marketing in particular, which was one of the key channels for growth last year, accounting for more than 40 per cent of total online ad spend, is likely to see another big year. "Search isn't slowing down.

If anything, it's accelerating," says Jim Brigden, COO at marketing agency The Search Works. He thinks the market could double in size again over the next 12 months. "We're already seeing clients' budgets and forecasts for 2006, and they are spending a lot more on it."

The sector will become more competitive on the search engine side, with Microsoft expected to release its own paid-search ad product in the UK once its agreement with Overture ends in June 2006. Tino Nombro, managing director of search agency Ambergreen, says the issue with Microsoft is volume of searches. Google still holds the dominant position, way ahead of both Yahoo! and Microsoft's MSN.

"If MSN and Yahoo! start to win back consumers in 2006, it will make for a very interesting market," reckons Nombro. MSN's AdCenter uses personal data from Hotmail to serve more targeted paid-search listings. "This could enable MSN to offer a better conversion rate to advertisers, something it could really use to challenge Google's dominance," he adds.

MSN's entry into the market is likely to spark another trend. With more engines to advertise on, it will be more difficult for advertisers to manage listings in-house and could result in more outsourcing to specialists.

"It plays into the hands of intermediaries because no advertiser will want to manage listings across four or five networks, each with a different set of creative rules, copy length and back-ends," says Brigden.

Meanwhile, the debate surrounding online advertising has moved on. It's no longer about trying to persuade advertisers to use online - most already are - but using it to really interest and engage consumers.

Guy Phillipson, chief executive of the Internet Advertising Bureau (IAB), says falling broadband prices will provide more creative opportunities for advertisers through rich media and video. "We saw, from our latest figures, that rich-media advertising increased a bit, but it's still not big and I think it will really start to take off hugely in 2006 and 2007."

Andrew Hart, managing director of Associated New Media, agrees: "2006 will be the year of video. There are so many tools available that make it easy to broadcast video over-IP - look at the recent trials ITV is doing with local broadband video in the South East. I think we'll see a lot more video online."

This will bring new advertising opportunities, though Phillipson believes it won't be until late 2006 that the industry will actually work out the ad model for broadband TV. "There will have to be a fair amount of experimentation as advertisers and media owners find out what works and what doesn't," he adds.

Another major issue for advertisers is increasing intolerance among consumers for any kind of advertising - online and off - particularly when it's interruptive. New technologies are being developed that will allow consumers to block all online ads, not just pop-ups, such as the latest version of Microsoft's Internet Explorer, scheduled for release in 2006.

"We need to be increasingly mindful that users will start to try and avoid online advertising as much as they do other types of ads, so the challenge for brands is to create engaging content that people want to be a part of," says Chris Clarke, creative director at agency Wheel.

"We'll see agencies and clients moving away from standard schedule-based or broadcast-type advertising online - that will be a major trend next year."

There was an explosion in user-generated content in 2005, with blogs and community sites seeing massive growth. A new blog is created every second, according to blog tracker Technorati, while consumer review sites are increasingly popular. People are much more likely to believe another consumer than an advertising message from a brand.

Michael Steckler, head of sales and commerce at MSN UK, expects brands to find ways to tap into these growing online communities this year.

"It's a huge opportunity and a very cost-effective way of getting messages across by word-of-mouth," he says. He adds that MSN is working with several big brands to provide ad opportunities on its Spaces blogging service.

However, it is even more important in such situations to make sure ad content is relevant and of value to consumers. One way is to get them involved in the creation of ads, rather than just interacting with them afterwards. Bill Brock, managing director of digital agency Tribal DDB, describes this as consumer co-creation and predicts it will take off in 2006: "Co-created content and experiences will be developed, launched and distributed by consumers in collaboration with brands. This will finally enable us to get away from the broadcast mentality."

Clarke agrees that more brands will get involved in this type of marketing and is pitching such ideas to clients. "We're consistently asking them to think about how you can hand over a bit of control of the message to consumers," he says. "The reality is that consumers are all talking about brands, and the brands have to try and influence those conversations in an open, honest and sensible way."

But it's not just advertisers who are waking up to the potential of community sites. Traditional media brands are moving into the space, as witnessed by Rupert Murdoch's News Corp's acquisition of online community site MySpace in July 2005. ANM's Hart expects a key theme next year to be enabling more readers to generate content. Traditional media is built around a culture of the publisher having a strong voice, with few opportunities for readers to contribute. "There is going to be a big shift in this culture, and media organisations will have no choice but to get better at providing expert opinion while allowing the debate to be continued by readers," says Hart.

He also predicts more acquisitions by traditional media companies, fighting to get a share of online revenues, particularly with classified advertising and community sites. 2005 saw a number of acquisitions, including News Corp buying MySpace, BSkyB buying easynet, Daily Mail & General Trust buying Primelocation and ITV buying Friends Reunited.

However, Alex White, director of the UK Association of Online Publishers, predicts that the rate of acquisitions will slow. "The current land-grab frenzy should calm down and consolidate in 2006 as media owners invest in the new online opportunities they have acquired," she says.

Another area likely to see further consolidation is the digital agency sector. Wheel's Clarke believes this will be partly driven by the growing trend among clients towards global pitches. Panasonic, Sony Ericsson, Coca-Cola, L'Oreal and Phillips are examples of companies that have, or are planning to, produce global work. But few agencies are big enough to handle digital on a global scale, so many will try to fill in the gap.

Ashley Friedlein, CEO of e-consultancy, says: "There will be more industry consolidation of the type that has already seen the acquisitions of Glue by Aegis, Modem Media by Digitas and Wheel by LB Icon. Expect to see more mergers, acquisitions and partnerships, especially where companies are in different but related disciplines, which can be combined to add value."

In terms of new channels, video web-logging and podcasting are likely to see continued interest from brands, and expect to hear more digital marketing buzzwords. Clarke says Wheel was talking to clients about podcasting in early 2005, but they weren't interested. "Now," he says, "they are starting to understand it's about generating good content. There will be more convergence between different channels, and lots of tools we've been talking about for many years, such as 3G mobile and iTV, will actually start to come of age in 2006."

MERCEDES BENZ - January

The focus for Mercedes-Benz in 2005 was to recruit younger customers to the brand using online channels. In 2006, the emphasis will be on integrating online and offline.

"We're further integrating online with all print-based activity," explains online specialist Julian Mitchell. "This is being driven from one, powerful, central customer database. Therefore, no matter where prospects or customers are in the buying cycle, they will receive appropriate, consistent communication either through the post or by email, or a combination of both."

He adds that the company has learned more about the online habits of customers and found that an increasing number now rely on the web to research a purchase before stepping offline and into the showroom.

"We're excited about the new opportunities available to better target and engage with prospects through behavioural or geographical targeting.

Our plans are to work with fewer online media partners, but work more strategically.

"Other areas of digital development, following our B-Class success, include further expanding our mobile presence."

COORS - February

Nicola Young, who manages digital marketing for Coors' Grolsch and Carling brands, predicts the challenge for 2006 will be the same as for 2005 - competition for consumers' time.

"I expect this to get even more aggressive, with some great sites emerging and a lot of them. But I'd be very surprised if we saw a big influx of FMCG brands moving into online. We're starting to see it increase, but I think they're still very much focused on traditional media and will continue to be so for some time.

"Podcasting is obviously going to be big. There are probably some opportunities for branded content, in the same way that you could have sponsors of TV content, although it may not be as overtly branded."

Young also expects product placement within games to be a growing trend in 2006. "I think we're going to see that increase quite drastically.

"It's also going to be interesting to look at the convergence of different elements like broadband TV, mobile and portable games.

"We're starting to see technology really merge together and I think that is going to open up some huge opportunities for content while people are on the go."

MORE THAN - March

Last spring, Revolution revealed how More Than was planning to spend around £6 million on digital marketing. Neil Scaife, marketing communications manager, says the direct sales insurer will continue to increase online spend in 2006, but also focus more heavily on improving the efficiency of that spend.

"I also see more branding activity this year. We have tended to regard online as a purely transactional channel and measure it through sales metrics, but we undertook some brand measurement and found it had a real impact on our brand metrics. It worked better than TV in some instances, so now we know it works, we'll do more brand activity."

Scaife believes there will be more focus on online customer retention. "Sales are cheaper to acquire online, but retention is significantly lower. Clearly we need to incentivise customers, so we're looking at forms of online loyalty that will bed these people down."

"Another key focus will be testing. As companies invest more in digital, it creates the opportunity to test more. So now we're saying 'let's hive a proportion of our spend off and really use that as a dedicated testing budget'. We're all learning in this environment. It's changing so quickly that you've got to keep testing and learning."

Scaife believes that convergence between online and TV will change consumer behaviour. "The web still feels a little different as an environment. It is a place where you go bargain hunting. But, as technology converges, I think consumers will start to behave less differently online, and I don't think that's too far away."

USWITCH - April

USwitch, which relaunched the UpMyStreet portal in May 2005, expects more competition in its core markets of price comparison and search in 2006.

"In such an expanding market that there will inevitably be new players, but it takes a long time to set up a business, so we're in a strong position," says managing director Andrew Salmon.

"I think we will see even bigger growth in online advertising next year. But, with advertisers investing more, media owners will have to up their game."

Salmon believes Google's decision to drop agency commissions on paid advertising could encourage more advertisers to take search in-house.

"It levels the playing field for us, as we do our own search, so I'm pleased they've done it," he adds.

Lastly, Salmon predicts further growth in consumer review and blogging sites. "Customers love other customer endorsements and there are some great web sites out there, such as TripAdvisor and Ciao, that just do customer reviews. I reckon these are going to become a lot more prominent in 2006."

REUTERS - May

The news agency spent much of 2005 growing its online operations to help it develop its direct-to-consumer strategy.

This included the appointment of Tim Faircliff from Telegraph.co.uk as general manager, and hiring a new digital agency.

Faircliff predicts: "In 2006 you will see a lot more fluidity in the way content is displayed on Reuters.co.uk."

He is looking at ways in which the web site could be 'day-parted', so that users will be able to see different content at different times of the day. This, in turn, would create new advertising opportunities. Another area in which Faircliff forsees growth is blogging, and he is currently considering ways of incorporating blogging into the Reuters web site, such as having a section featuring blogs of the day.

"I expect to see the pace of technology, and consumer demand for it, step up another gear in 2006," says Faircliff. "There is a burst of new technologies happening around us, and all the while technology is becoming cheaper and more accessible. It's something all brands need to be aware of next year."

L'OREAL - June

L'Oreal's CRM and internet manager Hal Kimber, and former colleague Rafaella Geddes on the Lancome brand, talked to Revolution last June about how they were starting to integrate digital into their marketing strategies.

Kimber wouldn't speak specifically about L'Oreal's digital-marketing plans for 2006 as, like many FMCG brands, the firm keeps its cards close to its chest.

In 2005, FMCGs did start experimenting with online advertising more and Kimber expects more activity this year, but adds: "The ongoing challenge for the internet - certainly for FMCGs - is to demonstrate that it delivers a good return on investment compared with traditional media like TV and press, which have a proven track record of driving sales."

There continues to be a gap between the number of consumers using the web and the amount that advertisers spend on the medium, but Kimber expects it to start closing in 2006. He also predicts the divide between online and offline planning to start to close for brands and agencies.

"Media needs to be joined up and that should start with the agencies. They need to work together, so online is planned at the same time as offline media," he says.

As for mobile marketing, Kimber is not convinced that it will be a big channel for FMCG brands in 2006. "The big challenge that mobile has to overcome is that it's the most intrusive medium by a long way. Mobile may take off as other categories and sectors may find a place for it that generally works but, at the moment, the potential downsides of using the medium don't outweigh the benefits."

VIRGIN RADIO - July/August

Last year saw Virgin Radio launch an internet radio player, and add mobile and podcasting to its list of services. "I think our biggest challenge going forward is to keep up with the way in which people are consuming content," says James Cridland, head of new media strategic development.

Cridland says he also wants to add more value for users, depending on what platform they're on. "By that, I mean giving people more information when they're tuning in, making the whole radio experience a richer experience for them. Quite a lot of that has to do with added visual content.

"That's one side of it. The other side is getting closer to our audience. There are ways that we can begin to talk to audiences one-to-one and I think that will really have a large effect on what we're doing next year."

Cridland believes 2006 will see consumers become even less tolerant of badly targeted and designed advertising, no matter what platform it's delivered on.

"People want more control over what they do, including what commercial messages they receive. This is one reason why podcasting has taken off - it offers control."

BOOTS - September

"What I expect to see this year is increased personalisation of offers online and more targeted promotional and communications activity," predicts Boots.com director Brian Linnington.

In 2005, his core focus was on updating the site's fulfilment IT and processes. This year the firm will invest in email technology, web front-end personalisation and more online marketing. "Users are going to expect something that is relevant to them as they're looking at an e-commerce site," Linnington explains.

So, for example, different people will see different things when they visit an online shop, and receive different messages. "We do some of that, and it can only improve and become more targeted over the next couple of years," he adds.

Another important development for Boots will be the introduction of online prescriptions and electronic transfer or prescriptions, which is planned for 2006.

Linnington also predicts more consolidation in e-commerce. "I think there is going to be a key period of consolidation in the number of shops over the next few years," he says.

BBC - October

The BBC's head of new media and technology, Ashley Highfield, who was voted the most influential person in digital marketing in Revolution's Power 50, has big plans for this year.

Following trials of its seven-day catch-up download service, through the iMP (integrated media player) project in 2005, the broadcaster is hoping to launch MyBBCPlayer and introduce live streaming on at least one of its main TV channels over the internet.

"Over the next 12 to 36 months we're going to see broadband become ubiquitous, with connection speeds rising to around 8Mb - easily big enough to get good quality TV," he says.

"As a result of this, rights and technology issues will be solved, so that broadcasters will be able to make both current TV programmes and archive material available over the web. This is the climate in which the BBC will aim to launch MyBBCPlayer."

Highfield predicts that user-generated content will leap to "10-to-20 per cent of consumption - not the one-to-two per cent it is now". He also predicts that there will be an increase in 'platform-agnostic content packages', offering "a meaningful experience for the audience on whatever platform they choose".

But 2006 will largely be dominated by a battle among providers to lead the market for TV and video on the web, says Highfield.

"Sky, through the purchase of Easynet, will launch a wide range of channels over broadband; Google will launch Google video in the UK; and Virgin TV, or whatever the UK cable industry rebrands itself as, will launch high-speed broadband to every platform," he predicts.

02 - November

Dermot O'Mahony, head of portal production, spent much of 2005 focusing on a major redesign of the O2.co.uk consumer portal.

It is set to go live in the next couple of months and will continue to be a big focus for O2, with further enhancements planned.

"I want to try to create a little more synergy between mobile content and web content," says O'Mahony.

"I think people are going to seize upon the 'community' concept next year. Customer involvement and customer ownership is going to be a lot more prevalent. Customers are a different breed of people these days.

"We are all a lot more aware of advertising and marketing, and we will start to become more loyal to brands that engage us. Community sites are one way of doing that," he says.

O2 doesn't have any formal plans, but O'Mahony is looking at where the brand could use communities and how to best to get value out of them.

"Also, more importantly, we are looking at how our users will get value out of it, because if there's no value to them, they won't engage and that's the key thing," he adds.

NPOWER - December

Last month, Revolution revealed that npower is planning to double its digital marketing spend in 2006 and hire its first dedicated digital marketing manager.

The focus will also be on integrated communications, since the company merged its online and offline media into one agency group.

"There's a real sense of convergence around online, digital TV and mobile as people start to bring the various media channels together. I think that it's really going to happen next year," says Kevin Peake, head of customer marketing.

He is also interested in the potential takeover of Virgin Mobile by ntl. "That's exciting, as I would imagine it will allow advertisers to buy some sort of package across all those platforms and get some added value or discounts."

Peake predicts that marketers will expect more flexibility from online media owners next year. "I want to spend a lot more of my budget online and one of the things that will help is for media owners to offer me more innovative packages, for example, around sponsorship."