UK Online Advertising The Success StoryGuy Phillipson – CEO

In this presentation

• Online overtakes TV• Audience and Broadband• 5 reasons for success• What next in the UK?

1. Online revenues overtake TV

It’s Big

News

£1,752.1mmarket in H1 2009

An increase of£82m year-on-year

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

4.6% increase

H1 2009 vs. H1 2008

on a like for like basis

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

Online advertising reaches record £920m in Q1 2009

47.442.836.638.936.645.251.163.888.0105.2119.7

152.1171.8224.1

303.5327.0

350.5

461.2514.9

583.7

653.8680.6

724.1754.2

847.0

920.0

832.0822.7846.1

834.0

385.5456.0

174.6254.6

0

100

200

300

400

500

600

700

800

900

1000

Q101

Q201

Q301

Q401

Q102

Q202

Q302

Q402

Q103

Q203

Q303

Q403

Q104

Q204

Q304

Q404

Q105

Q205

Q305

Q405

Q106

Q206

Q306

Q406

Q107

Q207

Q307

Q407

Q108

Q208

Q308

Q408

Q109

Q209

£ m

illio

ns

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

‘01 ‘03‘02 ‘04 ‘05 ‘06 ‘07 ‘08

Radio

Outdoor

Direct Mail

Press Display

TV

23.5%

18.5%

11.0% 4.4%

3.3%

1.0%4.8%

11.5%

21.9%

InternetTelevisionPress DisplayDirect MailPress ClassifiedOutdoorDirectoriesRadioCinema

% share of revenues for January to June 2009

Total advertisingmarket

£7.466bn

H1 2009 market share 23.5% (18.7% in H1 2008)

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures.

-25.0%

-15.6% -14.5%

-7.8%

4.6%

-37.3%

-16.1%-20.4%-22.0%

PressClassified

Directories Outdoor PressDisplay

TV Radio Direct Mail Cinema Internet

Total advertising market growth = -16.6%

Source: PricewaterhouseCoopers / Internet Advertising Bureau, The Advertising Association / WARC: WARC estimate for directories.

Online only medium showing growth in H1 2009

Year on year growth for H1 2009

Total by Country 2008 and 2007

€ 2,889

€ 2,501

€ 1,537

€ 729

€ 667

€ 497

€ 282

€ 3,441

€ 2,975

€ 1,821

€ 794

€ 799

€ 628

€ 442

€ 415

€ 345

€ 286

UK

Germany

France

Netherlands

Italy

Spain

Sweden

Denmark

Norway

Belgium

2007

2008

Source: IAB Europe/PwC ©

The largest 6 countries make up 81% of the total

Spend on online as a percentage of all media spend by country

24.4%23.1%

21.1%19.5%

18.0%16.1%

15.2%12.7%

11.5%10.8%10.5%

8.9%8.7%

6.8%2.1%

DenmarkUK

Norway Sweden

NetherlandsFrance

GermanyPolandFinland

HungaryBelgium

SpainItaly

AustriaGreece

Source: IAB Europe/PwC, WARC

Online has established itself as a main medium with a share of 20% and more in several countries

Note: This is based on WARC main media spend data, excluding internet with IAB ad spend added back in

UK is 10 points ahead of the US

USAat

13%

Audience and Broadband infrastructure

34.7m36.4m

Jul- Dec 2008 Jun - Jan 2009

Number of internet users* in the UK

Source: NRS UKOM: Jul-Dec 2008; Jan – June 2009; *adults using the internet at least once in the last 12 months

71%UK Pop

73%UK Pop 44%

Online Pop

49%Online

Pop

Internet users going online more than once a day

Number of people online

15.3m

17.8m

Jul- Dec 2008 Jun - Jan 2009

44%online

pop

49%online

pop

18.1

20.8

22.924.6

27.729.1

31.7

34.1

93%

12%

10

15

20

25

30

35

Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 090%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

UsersBB

Continuous growth in online audiences and broadband penetration

% B

road

band

acc

ess

at h

ome

Onl

ine

audi

ence

(mill

ions

)

Source: BMRB Internet Monitor

Majority of broadband services are now above 2 MB

19%

6%

34%

24%

7%

70%

92%

47%

0% 20% 40% 60% 80% 100%

2007

2008

2009

< 2MB2 MB>2 MB

Re-Based: All Internet users aged 15+ who know their broadband connection speedSource: BMRB Internet Monitor May 2007; May 2008; May 2009

56% of home broadband users have used wireless broadband at home in the last month (May 2009)

35

29

25

56

47

19

25

45TVInternetRadioNewspapersMagazines

7

24

47

4

18

Weekdays

Saturdays Sundays

Source: BMRB Internet Monitor, May 2009 Base: All Internet users aged 15+

Online second only to TV% of media time for all internet users

The broadband leaderboard

92%

90%

88%

88%

82%

69%Switzerland

Italy

United Kingdom

Germany

Spain

France

Source: Nielsen Online, September 2009

5 Reasons for success

1. Accountability – Online’s Key Strength

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

IAB estimates for actual ad spend by format are based on samples of categorised revenue from key IAB members provided by PwC. Data excludes unclassified figures.

Half year total£1,752.1m

% share of revenues for H1 2009

The digital media mix

18.1%

19.2%62.6%

DisplayClassifiedsPaid for searchSolus Email

Search is the gateway to brands

• Engagement• Purchase• Registration• Retention• Awareness• PR

Search

More methods of accessing search

Mobile search• Locations• Price comparisons• News• Sport• Weather• Video

“iPhone is already driving unheard-of levels of mobile internet usage, and the introduction of flat rate data tariffs is expected to increase this further.” Vivek Dec, O2

2. “Early Adopter” Categories

Cars, Tech, Mobile, Finance, Travel…

Display Sector Market Shares

3.5%

4.0%

6.1%

8.1%

9.4%

9.5%

11.8%

13.2%

13.3%

19.1%

Business and Industrial

Government, social, poilticalorganisations

Retail

Consumer Goods

Automotive

Travel & Transport

Entertainment & the Media

Finance

Telecomms

Technology

H1 2009

IAB estimates for industry sector shares are based on samples of categorised net revenue from key IAB members provided by PwC. Data excludes unclassified figures and covers 85.5% of online revenues in H1 2009.

*

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

Based on 86% of total display ad spend revenues

Source: PricewaterhouseCoopers / Internet Advertising Bureau / WARC

And 5 years ago….

IAB estimates for actual ad spend by industry are based on samples of categorised revenue from key IAB members provided by PwC. The ranking now shows Telecoms as a separate category (previously included in Business & Industrial).Data excludes unclassified figures.

0.4%

0.5%

1.1%

1.5%

1.6%

2.8%

4.0%

4.8%

8.1%

10.8%

11.8%

13.5%

19.4%

Leisure

Consumer-to-consumer Classifieds

Govt & other organisations

Gardening & Agriculture

Business & Industrial

Retail

Telecoms

Consumer goods

Entertainment & Media

Automotive

Travel & Transport

Technology

Finance

3. Video and Rich Media

Video pre-roll spend up 195%

Up 99% Up 195%Mobile and Video are young shooting stars

Audiences Watching Video

Online Video Works!Online Ad Effectiveness: Display vs. Video Units

4. TV and Online –Better Together

TV Advertising & Online Advertising Are More Effective When Used Together

Impressions of Uniqueness Are Greatly Improved

17

30

66

38

57

79

1523

52

Finance category average Car category average FMCG category average

Seen TV only or Online only Seen Both Seen Neither TV nor Online

% Agree: ‘This brand offers something unique from other brands’

Uplift among those exposed to both TV + Online :

+27% points

+13% points+21% points

= Significantly higher

= Significantly different to group who’ve seen neither TV nor Online

25 25

69

4551

77

19 18

56

Finance category average Car category average FMCG category average

Seen TV only or Online only Seen Both Seen Neither TV nor Online

TV & Online Ads Together Raise Purchase Consideration

Base : 16-34 ads main shoppers (1,004)

% Agree: ‘I am likely to buy/use this brand in the future’

+26% points

Uplift among those exposed to both TV + Online :

+20% points

+8% points

= Significantly different to group who’ve seen neither TV nor Online

= Significantly higher

5. Agency Infra-structure

There used to be a digital divide in media agencies

1999 1999

Digital Specialist

The Rest!

Traditional Shops

Now they’re all doing it!

2009

Creative comes from specialists

Traditional Shop

Art Director +

Copywriter

Digital Agency

Creative Director+

Technologist

What next in the UK?

The UK Industry Planning System Launches in January 2010

Thank you