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MP72104

MAPS : Internet Advertising: November 2004

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This report covers: internet advertising,

companies covered include: The Interactive Advertising Bureau, The UK Association of Online Publishers, Banner Advertisemnts, Pop-Up Advertisements, European Interactive Advertising Association, Interactive Advertising Bureau, Uk, Europe, US, Conchango, UK, Diffiniti, i-Level, Incepta Online, Oyster Partners, Profero, SBI Framfab, Tribal DDB, Wheel,

EXECUTIVE SUMMARY

Executive Summary

One of the main drivers of the market for Internet advertising has been the growth in take-up of Internet packages — and notably of broadband connections — by consumers over the past 5 years. This will afford greater opportunity for creativity in advertisement design, including the development of rich-media advertisements, which are more suitable for the faster broadband connections than for traditional dial-up connections.

Expenditure on Internet advertising rose dramatically during 2003, reflecting the growing confidence in online advertising by the marketing community, and a gradual improvement in the general fortunes of the advertising industry.

Paid-for search marketing, first adopted in 2001, largely by online businesses in the travel and finance sectors, is an increasingly important element within the Internet advertising mix. It is popular with media buyers because it is simple and its success is easily measurable.

There has been much activity among online advertising agencies during 2003 and 2004, with a number of acquisitions and strategic alliances. These have focused on a more international approach and on the increasing importance of online marketing and advertising as part of the general advertising mix.

One of the most important barriers to Internet advertising reaching mainstream status in terms of advertising media is the difficulty in measuring how effective it is. There are often inconsistencies between the measurements provided by the advertisement servers belonging to the advertising agencies and those provided by the publishers of the Web pages on which the advertisement appears. The industry is currently working to improve the situation and to try and establish a 'single currency' for advertisement measurement for use by media owners, agencies and technology providers.

Key Note's original research found that nearly half of consumers (49%) can now access the Internet at home and that almost one in five (19%) have broadband Internet access, either at home, work, or in their place of education. However, 29% claim to have no interest in the Internet.

Online shopping is now well-established in the UK; nearly a third of respondents (32%) have personally bought goods or services over the Internet. The proportion that positively reject Internet shopping is relatively low, at 9%.

The marketing of websites through other media is widespread. Just over one in five respondents (21%) say that they have visited Internet sites that they have heard about on television or in newspapers or magazines. This is nearly twice as many as the 11% who say that they have been directed to websites from advertisements on other sites.

Interest in online advertising is low among Key Note's respondents. 14% have software which blocks pop-up advertisements; only 3% say that they enjoy rich-media Internet advertisements, which include music and/or animation. E-mail marketing is acceptable to 9% of respondents.

11% of respondents have visited Internet sites which include classified advertisements, but only 3% and 2% respectively have either responded to or placed such advertisements.

Key Note forecasts that the Internet advertising market will continue to grow at a strong pace, although growth will be somewhat slower during the second half of the decade.

TABLE OF CONTENTS

Executive Summary

1. Introduction

OVERVIEW

DEFINITIONS

2. Strategic Overview

BACKGROUND

INTERNET ACCESS

Table 1: UK Households with Home Access to the Internet (%), 1999/2000-2003/2004

Table 2: Trends of UK Adults with Internet at Home (%), August 2002-February 2004

Table 3: Trends in Internet Take-Up Among UK SMEs (%), August 2002-February 2004

THE CONSUMER

Variations in Internet Access

Table 4: Households with Home Access to the Internet by Government Office Region (%), 1999/2000-2003/2004

Table 5: Households with Home Access to the Internet by Gross Income Decile Group (%), 1999/2000-2003/2004

Internet Usage

Table 6: Adults Who Have Used the Internet in the 3 Months Prior to Interview by Sex and Age (%), October 2000 and April 2001-2004

Table 7: Reasons For Not Using the Internet (% of adults that have never used the Internet), April 2003 and 2004

Table 8: Adults Who Have Used the Internet in the 3 Months Prior to Interview by Place of Access (%), October 2000 and April 2001-2004

Table 9: Percentage of Adults Who Have Used the Internet in the 3 Months Prior to Interview by Purpose of Access (%), October 2000 and April 2001-2004

Table 10: Amount Spent on Purchases Over the Internet for Personal or Private Use in the 3 Months Prior to Interview (%), October 2001 and April 2002-2004

Table 11: Main Reason for Not Purchasing Over the Internet for Personal or Private Use (%), April 2003 and 2004

TRADE ASSOCIATIONS

The Interactive Advertising Bureau

The UK Association of Online Publishers

MARKET SIZE

MARKET FORECASTS

3. Market Analysis

MARKET SIZE

Table 12: Internet Advertising Expenditure (£m), Years Ending December 1999-2003

Table 13: Share of Advertising Expenditure by Medium (%), Years Ending December 1999-2003

SEGMENTATION

Table 14: Internet Advertising by Type of Site (% of number of advertisements), 2002 and 2003

INTERNET ADVERTISEMENT FORMATS

Table 15: Internet Advertising by Format (as % of half year revenues), 2002 and 2003

Search Marketing (Paid Listings)

Banner Advertisements

Pop-Up Advertisements

COMPETITIVE STRUCTURE

MEASURING EFFECTIVENESS

RECENT CAMPAIGNS

THE CONSUMER

4. An International Perspective

OVERVIEW

EUROPE

European Interactive Advertising Association

Interactive Advertising Bureau Europe

Table 16: EU-15 Media Share (%), 2002-2005

Table 17: Allocation of Time Spent by Consumers on Media Type in Europe (%), 2003 and 2004

Table 18: Allocation of Time Spent by Consumers on Media Type in Europe by Selected Countries (%), 2004

Table 19: European Online Activities (%), 2004

Table 20: Attitudes Towards the Internet in Europe (%), 2004

THE US

Table 21: Trends in Internet Advertisement Formats in the US (%), 2002 and 2003

5. PEST Analysis

POLITICAL FACTORS

ECONOMIC FACTORS

SOCIAL FACTORS

TECHNOLOGICAL FACTORS

6. Consumer Dynamics

SUMMARY RESEARCH

Table 22: Summary of Original Research (% of respondents), 2004

INTERNET ACCESS

I Can Access The Internet At My Home (S1)/I Cannot Access The Internet At Home, But I Can Access It At Work, College, University Or School (S2)

Table 23: Internet Access at Home or Elsewhere (% of respondents), 2004

I Have Broadband Internet Access (At Home, Work Or Place Of Education) [S3]

Table 24: Those With Broadband Internet Access (% of respondents), 2004

I Am Not Interested In The Internet (S4)

Table 25: Those Who Are Not Interested in the Internet (% of respondents), 2004

INTERNET SHOPPING

I Have Bought Goods Or Services Over The Internet (S5)/I Have Not Bought Goods Or Services Over The Internet, But Would Be Happy To Do So (S6)

Table 26: Those Who Have Bought, or Would be Happy to Buy, Goods or Services Over the Internet (% of respondents), 2004

I Would Not Buy Goods Or Services Over The Internet (S7)

Table 27: Those Who Would Not Buy Goods or Services Over the Internet (% of respondents), 2004

PROMOTION OF websiteS

I Have Visited Internet Sites That I Have Heard About On TV, Or In Newspapers Or Magazines (S8)/I Have Visited Internet Sites That I Have Heard About From Advertisements On Other Websites (S9)

Table 28: Those Who Have Visited Internet Sites Heard About On TV, in the Press, or From Advertisements on Other Websites (% of respondents), 2004

ATTITUDES TO INTERNET ADVERTISEMENTS

I Have Software Which Blocks Internet Advertisements (Banners Or Pop-Ups (S10)/I Have Clicked On Internet Advertisements (Banners Or Pop-Ups) [S11]

Table 29: Those Who Have Advertisement-Blocking Software, and Those Who Have Clicked on Pop-Ups and Banners (% of respondents), 2004

I Am Happy To Hear About New Products Or Services By E-Mail (S12)/I Enjoy Internet Advertisements Which Include Music And/Or Animation (S13)

Table 30: Those Who Are Happy to Hear About New Products and Services by E-Mail, and Those Who Enjoy Rich-Media Internet Advertisements (% of respondents), 2004

CLASSIFIED ADVERTISEMENTS ON THE INTERNET

I Have Visited Internet Sites Which Include Classified Advertisements (S14)

I Have Responded To Classified Advertisements On The Internet (S15)/I Have Placed Classified Advertisements On The Internet (S16)

Table 31: Those Who Have Visited Internet Sites Which Include Classified Advertisements (% of respondents), 2004

Table 32: Those Who Have Responded To, and Those Who Have Placed, Classified Advertisements on the Internet (% of respondents), 2004

7. Company Profiles

CONCHANGO (UK) PLC

Corporate Strategy

Profitability

Table 33: Financial Results for Conchango (UK) PLC (£000), Years Ending 31st December 2001-2003