The Interactive Advertising Bureau Europe is currently holding its annual Interact Congress, an event that brings together the main protagonists of the European digital industry here in Brussels. For the occasion, IAB Europe in conjunction with PriceWaterhouseCoopers today released the findings of its annual advertising expenditure survey for the year ending December 2008. The gist: growth in digital advertising significantly slowed down last year, especially in more mature markets, and the outlook for this year is grim.
In 2008 the total European online advertising market, or at least the 19 markets analyzed by IAB Europe and PwC, was worth €12.9 billion (approx. $18 billion) with a like-for-like growth rate compared to 2007 of 20%. For comparison, online advertising grew 10.6% in the United States in 2008 (outpacing TV) and was worth €16.6 billion ($23.4 billion). However, the 20% growth figure paints a better-looking picture than the harsh reality, which is that it is far below previously stated expectations, of course caused by the crumbling of the global economy and the huge strain it has put on digital advertising spending worldwide.
If you look at the top 10 markets in Europe, year-on-year growth rates were under 20% more often than not. Considering the fact that these markets account for about 93% of the total value of the market, the following chart doesn’t accurately reflect the slowed growth because it over-accentuates the massive growth in Slovenia, Poland and Austria.
Broken down by formats, search remains the leading format in Europe with the strongest year-on-year growth rate (26%), accounting for 43% of online ad expenditure in the countries measured and a value of €5.6 billion. After search come classifieds, with growth rates of 17.4% bringing it to 26% share of total ad spend and a market value of €3.8 billion.
Alain Heureux, President and CEO of IAB Europe, acknowledges that while the overall picture in Europe is one of growth, what is clear from these figures is that 2008 was a tough year for online advertising. And if you thought that trend was going to reverse this year, Eva Berg-Winters, Senior Manager at PwC, is here to put you back with your feet on the ground:
“2009 is set to be a difficult year for online advertising. Decline is likely in a number of mature markets and, where there is still growth, we expect it to be much lower than previously.”
In the U.S., IAB as recently as last week reported that online advertising declined 5% in the first quarter of 2009 to $5.5 billion, compared to the first quarter of 2008. Industry revenues were down an even steeper 9.8 percent sequentially from the fourth quarter’s $6.1 billion.
Interactive advertising Bureau Europe has very rightly said that online advertising has become a tough market to compete. All the best to all online marketers.
Don’t you guys just love seeing graphs that go down and make you feel something bad is going on?
But then comes the reading of the graph’s title (probably a part never reached by many reader) and the title says: “Total GROWTH by country”.
Yes, GROWTH as in got bigger.
Yes, GROWTH as in 77% GROWTH in Sloevnia and 60% in Poland.
Yes, GROWTH as in ONLY 9% growth in the Netherlands, the country to have the least GROWTH.
As the economy was actually declining in some fields, call these lesser amount of GROWTH “though” seems a bit inappropriate to me.
Amir, unfortunately, ‘growth’ is not always unilaterally a positive thing. All depends on expectations, and in this case growth was far below them, something both IAB Europe and PwC have acknowledged by the way.
Robin, obviously 2008 was not the best year in world economy and thus many fields have not met their expectations. It just seems to me your post is painting a picture more gloomy than what is really happening. Showing down-sliding graphs was just a weird coincidence?
It was a bad year, everyone pretty much agrees on that, I’m not sure how reporting that is painting a ‘more gloomy picture’. As for the graphs, they were supplied by IAB/PwC.
Disappointing maybe, but bad?
Wondering how one can predict a market like online advertising, if it is currently uncertain when the economy will pick up and how slow or fast it will pick up again.
Forecasts can be made on nearby history.
In the current recession there is no past reference point.
The trend is the same in different parts of the world. Online advertising, in fact offline advertising spend is going to be less in next few months. All corporations big or small, Recession has hit us all ! /
We have been hearing about the decline in online advertisements for a while. While it might decline in terms of revenue, it is unlikely that online advertisement will decrease in quantity. Are the online ad rates decreasing?
Hi Robin, great stuff! do you kindly know where can we dowload the full report?
thanks a lot
It will have to drop further before it hits a bottom.
Ouch!, this isn’t very surprising news at all considering the trimmed marketing budgets across the board in all corporations.
I am more interested in the data related to how social web platforms can help companies to get better returns for the each marketing dolor they spend currently while building loyal users.
Unfortunately the entire world is feeling the pinch… Better times are coming and we all just need to weather this storm.
The primary problem is that you have to do the whole campaigning in at least a dozen languages to reach the population of 500+ million.
Even if you take a majority of the educated people in Europe who will speak a significant amount of English, they will definitely submit their searches, etc. in their native language.
Unlike in the US, where you can reach 200+ million people with one, maybe two languages.
Slower growth during recession is actually great news.
Although large markets are tougher and tougher, emerging online markets are a very atractive long tail.
I guess we will see a decline in client service cost, lower margins and better sollutions. But we are yet to see the peak for the online advertising industry.
I don’t agree!
News like this makes organic SERP positioning even more key I would think.
It’s already a known thing that growth in mature markets is much lower than growth in emerging markets, that’s why the large differences in market growth between Holland and Poland, for example.
However, as Mihai said, growth in recession time, even if small, it’s still good news.
Also, wondering why Romania was not in the graph, although the growth of the Romanian online advertising market was somewhere short of 50% in 2008, as compared to 2007, thus placing Romania somewhere in top 5 in the growth graph.
“Croatia, Hungary, and Romania were new to the research in 2008 so no comparative figures are available.”
True, but there are IAB Romania data from 2007 as well, so there should have been comparative figures…
I’m tired of this doom talk about online advertising.
My ad revenues go up every month. Most months, my eCPM goes up. Business is good.
The upside of this is that it may mean online ad revenue is more volatile than people realize – which means its future growth may exceed expectations. The downside is that online ads may be less effective than people thought – meaning future growth will not exceed expectations unless marketing ROI can be improved.
I think the biggest problem is figuring out how to optimize marketing ROI – that might take a while as marketers collect online data and build better predictive models for targeting ads.
Never really thought about this before, but I was wondering what the impact of the major auto and insurance companies have on this report and the one regarding the US. Obviously those companies had HUGE online ad spend, and alone they could be accounting for the decrease (in the US) or slowed growth (in Europe). How often did you see a GM ad online 6 months ago, and how often do you seem them now?
What isn’t mentioned is that there is growth within certain areas of online advertising. For example, at Hydra we have seen tremendous growth in Cost Per Action (CPA) advertising. In this economy, or an really, marketers are willing to spend if you can show them the ROI. CPA is all about ROI since you only pay for the ad’s that give you your desired action. That action could be a lead, a form filled out, or even a sale. Advertisers will spend when they know it is going to more than pay for itself. CPA is growing.
We have seen our online revenues take significant hit this year. They are down in the range of 20 percent or so. I seriously think that it is all because of slowing economy and more and more companies are wanting more for less. I do not think that we will see any uptrend in next 6 months or so.