Economy and Industry Maturity to Slow U.K. Web Ad Growth

The U.K. digital ad industry is “well positioned” for a downturn in media spend, according to predictions from the World Advertising Research Centre (WARC).

Forecasting a slowdown for the U.K. ad industry as a whole in the years ahead, the organization’s “Winners and Losers of the Next Media Downturn” report predicts growth will slow to 12 percent in 2009 from 17.6 percent this year.

Online advertising can “confidently be predicted to grow” regardless of cutbacks in ad budgets, writes WARC’s Media Editor and report author Laura James, adding, “there still seems plenty of room for expansion of the medium.”

This online growth will be aided by reduced spending on rival media such as TV, print, and direct mail, the report says, with increased spend from a few key verticals. Advertisers of consumables, durables and services are predicted to focus more of their budgets online, thanks to the “flexibility, breadth of opportunities and lower costs of entry” the Web offers, stated the report.

One vertical likely to reduce its online spend however, is the financial service industry, which currently accounts for 26 percent of ad revenue, the report says.

WARC’s predictions are in line with the findings of the Institute of Practitioners in Advertising’s Q2 Bellwether report, released in July, which showed growth in online ad budgets and cuts in all other ad mediums. However, it too noted that the rate of online spend was waning, reporting that budget growth was at its slowest since 2003.

Although research firms agree that growth in online ad spend is slowing, it’s difficult to pinpoint where the effects of a troubled financial climate end, and where simple market maturity steps in.

Following the release of his company’s 2008 search marketing buyers guide last week, E-consultancy editor in chief, Chris Lake said of the U.K. market: “We’re predicting noticeably slower growth [in search marketing spend] this year than we saw in 2007. Although there is significant room for further growth in spending, the sector is now becoming more established and, as such, cannot keep on such a steep curve indefinitely.”

“While there remains strong growth in the market, the upward trajectory of search has begun to flatten as the industry has become more mature, as has happened in the United States,” the E-consultancy report adds.