Leading UK websites such as MSN, Yahoo!, MySpace and YouTube could raise display ad prices as UK internet penetration slows but the number of online ad campaigns rockets, according to a new report.
The report, by Thomson Intermedia, has concluded that because the number of new households surfing the internet will slow this year due to market saturation, the increasing number of advertisers seeking to run online ad campaigns will not be matched by a growth in the number of eyeballs to watch those ads.
Broadband access in particular - which has fuelled web surfing and the rise of the likes of video-sharing websites such as YouTube - is at saturation in the UK.
"It is about the law of supply and demand," said Paul Ryan, head of insight at Thomson Intermedia. "Advertisers want to get online in a big way, but the inventory (display ad slots available for advertisers to buy) won't be there to satisfy that demand, because the rate of increase of the UK internet audience has slowed."
The websites that are most able to "benefit" from this situation are the ones that already take the lion's share of the online display ad market, said Mr Ryan.
According to Thomson Intermedia, those include the likes of MSN, Yahoo!, Bebo, Orange, YouTube and MySpace.
It should be noted that the UK online ad market, estimated to be worth a total of around £2bn last year according to the Interactive Advertising Bureau, is over 70% dominated by search advertising (of which Google controls as much as 70%). Thomson Intermedia's figures for the online ad market only examine the approximately 24% that is spent on display.
The company's report for spend on online display advertising in 2006 showed that this had grown by some 19% year-on-year.
It also showed that despite a tough market, ad spend on display and the key classified markets in the press actually increased by 6% year-on-year to £2.6bn.
The TV market was down by 4% year-on-year in 2006, dipping to £3.98bn. ITV saw a drop of 12% in revenue from its terrestrial channel - however this reduced to 8% overall thanks to strong revenue gains across its digital channel portfolio.
Entertainment, media and leisure advertisers, considered to be a TV advertising stalwart sector, reduced TV investment by almost £15m and increased digital spend by 35%.
Radio took an 8%, hit dropping to £300m.
"The overarching trend seen against this deflationary TV background and online's enthusiastic response to its burgeoning audience has been a shift toward quicker returns on investment," said Sarah Jane Thomson, chief executive of Thomson Intermedia. "Advertisers are beginning to move away from 'brand' activity that pays back over a number of years to that which can be proven to affect sales in this fiscal year."
Internet and press were identified as the big winners of this trend; TV and radio the losers.
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