Market Summary - Internet

At a Glance

73% of the UK is now online: Penetration continues to grow, but given that online is now a mature medium the rate of growth is slowing.

We’re becoming more active Internet consumers: 49% access the web daily and they are doing more online - 53% share photos, 63% have created a social network profile and 40% have started a blog.

The online market has fared better than other media channels during the downturn. For the first time ever the Internet Advertising Bureau & PWC  reported that online ad spend overtook  TV and now takes the largest proportion of ad-spend of any media.

Hot Topics

Greater mobility - conditions are ripe for mobile internet adoption, intuitive smart phones, unlimited data packages and a wealth of services to connect to mean that consumers are at last embracing mobile. 81% of iPhone owners go online everyday v 11% for average mobile users and whilst only c. 1.5m iPhones have been sold in the UK, Apple represents nearly 50% of all mobile web views.  Given all the handset manufacturers are attempting to develop their ‘iPhone killer’ and the regularly with which consumers upgrade their handsets, more and more of us will have a decent mobile internet experience sitting in our pockets.

Greater consumer participation – Whilst social media is much hyped, it genuinely represents a fantastic opportunity to understand more about consumers and build stronger relationships with them.  Adoption of social technologies is a major behavioural shift and is now mainstream - WAVE (UM’s global social and emerging media tracker) highlights that 63% of UK’s active internet users have a social network profile (download WAVE.4 at http://universalmccann.bitecp.com/wave4/. Whilst it’s wise to tread carefully, it’s essential to understand the role that social media can play within your communications.

Search – given search takes 62% of ad spend it’s always a hot topic.  Whilst it’s a concern for some advertisers that Google are dominant with a 90% share, there are increasing signs that the competition are up for the fight.  Microsoft’s Bing is a good first stab at offering an alternative and new entrants such as Wolfram Alfa, along with Yahoo’s attempts in the mobile space are worth keeping an eye on.

The Web TV / IPTV space is a varied landscape, from dogs on skateboards, professional content produced exclusively for the web, as well as catch up TV services - it’s boom time for web TV.  The non-commercial BBC iPlayer has set the standard at the quality end, but it’s still early days.  Developments such as Project Canvas (assuming it gets the regulatory thumbs-up) will offer advertisers access to greater audiences with the brand-building power of TV and the interactivity and accountability of online.

Greater targeting opportunities – new ways of honing in on audiences like behavioural targeting and new buying technologies such as exchanges mean we can increasingly cherry pick audiences and pay for these on our terms.  Increasingly we’ll buy prospects based on what they do rather than where they are.

What is it?

The internet is a massive global network of interconnected computer networks.  Just to give a feel for how big it really is - Microsoft's Bing team puts the amount of web pages at "over one trillion".  That’s over 150 web addresses for everyone on the planet.  Being so colossal, the internet is many things:

• A powerful, searchable information source – Wikipedia for example has over 13 million articles
• A gateway to on demand entertainment - the internet is putting people in control of when they consume media. 6.1 m people used the BBC iPlayer in September according to ComScore 
• A place to connect and share experiences - Facebook is now the 3rd most popular destination online in the UK, accessed by 74% of the web population (Comscore)
• A transactional platform - 30m of us in the UK bought online in 2009 (Forrester Research) and spent $38billion (Verdict Research Limited)
• An enabler for collaborative working - Microsoft and Google are both upping their efforts to provide services in the ‘cloud’

How Does it Work?

From marketer’s perspective online offers a diverse toolkit – from the ability to reach large aggregated audiences quickly to honing in on extremely niche and valuable segments cost effectively.

There is a huge range of creative and format opportunities available - from simple text ads through to highly interactive and impactful video units.  As always, the secret is to ensure that communications are of value to consumers and not overtly intrusive. Online is traded in a number of ways, some inherited from traditional media, others the industry continues to develop on its’ own:

• Paid search (which accounts for 62% of online ad spend) operates on an auction basis.  Advertisers bid for clicks on their ads which appear alongside relevant search results.  Bid price is only one element of many which influence the visibly of an advertiser’s messages on the engine
• The display market consists of a large number of sales-points, including traditional players like the Guardian, online only suppliers and ‘middlemen’.  These intermediaries connect advertisers with multiple publishers, often adding a layer of technology, such as behavioural targeting or ‘on the fly’ optimisation.  Over the last few years sales-houses and networks have become a prominent part of the market
• The industry has been innovative in adopting new commercial models - these vary depending by media type, objective and market conditions.  Affiliates for example are compensated on performance basis e.g. sale.  Some brand advertisers have started experimenting with cost per engagement payment models.

Key Features & Benefits

Multiple benefits of online have driven its rapid growth as an investment channel:

• Accountability - no mention of online would be right without the ‘A’ word. Ad-servers, analytics and brand measurement tools ensure there’s nowhere to hide
• Targeting capabilities – No other media channel offers the ability to hone-in on segments like online, from search ‘hand-raisers’, communities and behavioural targeting
• Engagement – rich formats and interactively if used in the right way will drive impact and engagement
• Low cost of entry and scalability – Anyone with a credit card can advertise online. The flexibility and scale of online mean that once results are proven then advertisers can scale-up their efforts quickly
• Platform for dialogue – every message is an opportunity to begin or continue a conversation with a prospect. These potential customers have the tools at their disposal to spread the word on a brand’s behalf
• The ‘glue’ between other channels – to capitalise on the online opportunity advertisers need to understand how all communications drive online behaviour

Key Audience Strength

Like most mature mediums the Internet delivers against most demographics. We’ve seen over the last 10 years a ‘normalisation’ of the online user from upmarket, if somewhat geeky men to become more representative of the UK population. However, there are still some segments, particularly those with low incomes that index poorly against online access.

As with all media, different segments do different things online. The myth that social networks for example are the realm of the youth doesn’t stack up today. Facebook’s largest growing segment is the over 55s and it’s the 30-40 who are embracing Twitter. Things never stand still.

One thing is for certain that with each generation our reliance on the internet whether for information, receiving TV, communication or entertainment continues to grow. Those segments who are not online will become even more marginalised. Given the obvious benefits of the internet the widely held view now is that internet access should be considered basic necessity, like water or electricity.