It’s been brewing for the last couple of years, but now it’s official (based on data reported by the UK Internet Advertising Bureau) — UK spending on internet advertising topped £1.75 billion in the first half of 2009, a rise of just 4.6 per cent compared to the same period last year. But the increase was enough for online advertising to pass declining TV spend, which sits at £1.64bn, for the first time in a major market.

Online advertising now accounts for 23.5 per cent of all UK ad spend compared with TV’s 21.9 per cent.

Five key drivers for this precedent-setting result, as identified by the IAB (with our own views added in italics):

1. Advertising networks boosting the market: Alongside the major portals, advertisers are increasingly turning to networks to book their online campaigns. According to Econsultancy research, 70% of online advertisers and their agencies work with three online advertising networks or more. Almost half (46%) the say they are working with more ad networks than a year ago, an average of 31% of online display advertising budget is believed to be spent on online advertising networks. As a result, UK agencies and advertisers are enjoying significant operational efficiencies that make life easier when it comes to placing advertising online.
2. Online as a direct response medium: 2009 has seen marketing budgets being stretched to their very limits, and online has proved its worth. Improved planning and insight tools have seen more advertisers flock to the medium to take advantage of its targeting, accountability and measurability. It’s very much a sign of the times: in recessionary environments, when CEOs are looking for cuts everywhere, it’s much easier for CMOs to justify expenditure where there’s demonstrable accountability. Conversely, television (despite its many acknowledged strengths) can usually only offer a very murky relationship between spend and sales.
3. Growth of new display formats: With the proliferation of video, the internet has become a highly engaging entertainment medium. Alongside tried and tested methods such as rich media, pre and post roll online video advertising is showing strong growth (a 195% increase year-on-year). This indicates advertisers’ willingness to experiment and invest in more engaging and interactive multimedia content. Yeah, maybe. Mostly, however, it’s about comfort and convenience. Advertisers and their agencies understand (or believe they understand) the power of moving pictures. Online video is finally widespread enough that advertisers can simply take their existing TV materials and (often for a fraction of the cost of broadcast television) simply transplant them to the internet. Job done, no thinking required.
4. Ecommerce booming: In a time of recession, people buying and shopping are taking to the internet for the best deals, making online the best place to reach bargain-hungry consumers. The continued annual growth in the online retail market is evidence that online is withstanding the challenges of the economic downturn and the retailers that continue to expand and improve their online presence. Say it with us: disintermediation. Cut out the middle man, hand over the savings to the consumer.
5. Faster, cheaper broadband: 92% of people now have a broadband speed on over 2MB and 56% of home broadband users now have wireless broadband driving audiences online and allows advertisers to provide consumers with richer branded content (BMRB Internet Monitor May 2009). Or, to put it another way, consumers with decent broadband don’t complain as much about over-indulgent advertising that sucks up bandwidth.

The emergence of online as market leader in the UK advertising world is a significant event, to be sure — paradigm shift and all that. But we should acknowledge that the UK marketing environment has some unique characteristics — for starters, the very existence of the BBC as a dominant but non-commercial television broadcaster means that advertisers have long been restricted in their ability to reach British consumers through the small screen at the levels taken for granted in other markets. As a result, alternative communications offerings have perhaps enjoyed readier acceptance in the United Kingdom than elsewhere.

In other words, it could be a while before other key markets reach the tipping point we’ve just witnessed in the old country.

You know about Google’s power in Search advertising, but how about in content — all those hundreds of thousands of independent websites that add Google ads to their pages in the hopes of earning a penny or two from their musings?

Turns out that the Google Content Network is actually “the world’s #1 ad network”, reaching more than 80% of global internet users. Six billion ad impressions are served each day across hundreds of thousands of content network websites (according to comScore Key Measures, October 2008). Thousands of AdWords advertisers place ads on the Content Network to complement their search marketing campaigns on Google.com and the rest of the Google search network.

How do Content Network ads perform for advertisers?
Google recently analyzed conversions, cost, and cost-per-acquisition (CPA) on the Content Network, and compared them to performance metrics on the search network across thousands of campaigns and many geographic regions.

Google have now published a white paper presenting the findings from this analysis. Perhaps surprisingly, it shows that advertisers who advertise on the content network see good results on a number of levels:

• Ads on the Google Content Network are likely to be as cost-effective – or even more cost-effective – than ads on the search network.
• The median advertiser has a content CPA that’s about 2% lower than their search CPA.
• The Content Network drives a significant share of total conversions.
• The Content Network drives nearly 20% of total conversions for the median advertiser.
• Conversion rates are higher for advertisers who used either of two AdWords campaign management controls: the Conversion Optimizer and site exclusion.

Content websites, from our perspective, have one significant advantage over search pages: consumers are not merely “passing through” the content website in a quest for some final destination, as they are in search. They’re more likely to linger, more likely to be interested in the primary topic of the website and thus potentially more interested in your marketing message as long as it’s directly related to the website topic (hence the importance of “site exclusion”, to ensure your communications are correctly targeted).

You’ll find the Google white paper here.

According to AdAge.com, Google is turning to Behavioral Targeting to beef up its display advertising business.

Here’s the scoop:

[On March 11 Google] announced it will launch a beta test of “interest-based targeting,” which lets advertisers target web users based on where they’ve been surfing across the internet. If a user is reading sports articles on NYTimes.com and also visiting CBSSports.com, for example, it could get lumped into a sports audience bucket, which advertisers can target.

Google will also let advertisers “re-market” web users across its content network, so if a person visits an advertiser’s site or abandons some products in an online shopping cart, that advertiser can find that consumer again on the web and serve him or her ads. In its beta version the targeting measures will be sold through Google’s direct-sales team, with a select group of advertisers taking part; later it will be available in the self-serve AdSense auction marketplace. The targeted ads, which can be either text or display, will run on AdSense partner sites and YouTube.com.

AdAge goes on to note that this is ”the first big sign Google is integrating into its large AdSense network some of the technologies it picked up with its acquisition of [advertising network provider] DoubleClick.”

Unfortunately, it’s also the time that, as reported by MediaPost, consumers remain concerned about online privacy issues. According to MediaPost’s Behavioral Insider newsletter:

Publishers and advertisers by now have internally devoted enormous investments in money, time and intellectual capital to behavioral targeting platforms. Yet when it comes to consumers themselves, most brands still like to pretend that behavioral targeting doesn’t exist, treating it like a secret vice to be locked away, hidden from the public that simply “can’t handle the truth.”

A recent study by Trust(e), an independent nonprofit online privacy advocacy organization, documents why that is precisely the wrong message for brands to be communicating.

The Trust(e) Behavioral Advertising Survey, conducted by TNS, surveyed a nationally representative sample of 1,008 individuals aged 18 and over on their attitudes about behavioral targeting. The survey found that, although consumers remain suspicious of and conflicted toward behavioral targeting, an increasing percentage of the online public are growing somewhat less uncomfortable about behavioral targeting, if (and it clearly remains a BIG if) brands radically step up their efforts to be more open, honest and transparent about where, when and how behavioral targeting is used.

Contrary to the assumption of some in the industry, behavioral targeting as a term is no longer esoteric. In fact, according to the survey, 43.2% of respondents said they’re familiar with the term, and 68.6% knew that their browsing information may be collected by a third party for advertising purposes. Over a third, 34.9%, felt their privacy has been invaded or violated in the last year due to information they provided on the Internet.

The survey found that consumers were not only very sensitive to any perceived intrusions into privacy, but also acted on that feeling by managing their privacy through activities like deleting cookies. Over 36% of respondents said they do at least one of the following in order to surf the Internet anonymously: use proxy surfing software; give fake names and contact info when requested by certain Web sites; and use a Web browser with privacy settings that delete cookies and don’t record a history of visited sites.

Here’s a sneak peek at a little of what our own Marketing Rag has to say about behavioral targeting:

“It creeps consumers out to think they’re being watched. George Orwell did such a great job of introducing the concept of Big Brother in ’1984′ so now people worry about the misuse of their personal, private data for nefarious purposes. Thankfully, most marketers really only want to know what consumers are up to so that they can sell stuff. Behavioral targeting enables marketers like us to promote products that we’ve learned are likely to be of interest to specific segments, rather than try to flog everything to everyone. We’re so over one-size-fits-all. For those consumers who (for example) don’t have pets, they would find it a great pleasure and a very useful side-effect of behavioral targeting NOT to be shown petfood ads.

“To send consumers the right messages, we marketers need to:

• acknowledge that, thanks to modern technologies, we’re better able to understand consumers’ needs and wants without having to constantly ask about them;
• propose that, as a result, we can offer products and services that are more likely to be relevant and of interest to individual consumers;
• enter into dialog with consumers to refine and personalize those offerings even further.

“The other main challenge for marketers, when considering Behavioral or Interest-Based Targeting, is to ensure we have a really good understanding of the processes by which consumers have been sliced and diced by the publishers — in other words, how they have been evaluated and clustered into segments deemed suitably alike (and presumed to be potential targets).  If we use Google’s ‘sports audience bucket’ as an example, are those within the bucket any more or less likely to be potential purchasers of our products? How will we know? Holy segmentation Batman, this sounds like a job for split-run testing!!

“There’s another issue to consider as well. If all the hottest prospects have been identified behaviorally and sold off in segments to interested marketers, at what point do we rule out advertising to the rest, because they are (by exclusion) NOT hot prospects?”