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.

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How is that possible? The Microsoft report delves into recent European Internet statistics and mounts a strong argument, going on on to observe that:

“The demand for non-stop connectivity will fuel the migration of online services from the PC onto other everyday devices – resulting in a shift towards seamless PC, TV and mobile experiences. Soon, it won’t matter what device you use to connect to your digital world – people will be able to communicate and get access to information on demand, anytime, anywhere.

“To continue to make the most of digital media and to engage with this digital generation, advertisers need to adopt new marketing strategies that create a conversation with the consumer, provide entertainment and fully embrace the new opportunities made available by technological innovations.”

Microsoft’s specific advice to advertisers attempting to engage in the digital arena:

1. Understand the environment
   Put the message into the right context. Research from Microsoft Advertising emphasises the need to overlay time, place, mood and motivation as digital is unique in delivering on so many different motivations and moods (Context Matters, November 07)
2. Move away from ‘push marketing solutions’ and join the conversation
   Information distribution is today driven by consumers and user generated content has given people a voice online. Digital is the only channel which can offer real-time conversations between brands and consumers – being at the same time both intimate and anonymous. Advertising that encourages interaction, input and community with this digital audience can help drive understanding of, and is more likely to be successful, in shaping consumer sentiment towards a brand, or having a direct impact on a new product launch for example
3. Reach out to the ‘creators’
   Identify the new ‘super influencers’ who are making the most of social media tools including blogs, video and podcasts. Online is the “point of influence” for many purchase decisions and the place where many brand associations are now being built or deepened. Recent Microsoft Advertising and Synovate research found that half of all 18-24 year-olds either review or offer opinions about products or services online
4. Provide content that is relevant, engaging and personalised
   Ensure advertising really appreciates this new role of the consumer as a “self regulator” – actively choosing content and messages relevant to them. Consider developing innovative and strategic marketing campaigns that go beyond traditional advertising formats. For example, rich media and audio/video which allow the creative community new ways to deliver emotional brand impact in the digital space.
5. Don’t bolt on digital
   Impactful and effective advertising content requires careful consideration and planning. Digital needs to be an integrated part of an advertiser media plan and marketing strategy. Embrace technology which is at the centre of enabling better integration of digital into the broader communications planning process.

All good advice as far as it goes, but our research indicates that marketers are out of their depth and unsure how to tackle most of the above five suggestions. We have a whole lot more to say on the subject in the current edition of MARKETING RAG. Subscribe now and we’ll send you that edition.

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