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Last Updated: Monday, 25 October, 2004, 08:09 GMT 09:09 UK
Ten years of selling in cyberspace
By Myles Neligan
BBC News Online business reporter

Online advertisement
Up to 40% of UK online ad revenues stem not from banner ads on popular web pages
A milestone in the short life of the internet is upon us.

According to industry sources, this week marks the tenth anniversary of the UK's first ever online advertisement.

Details are hazy, but it appears that in late October 1994, US telecoms firm AT&T became the first company to start promoting its services to the UK's then tiny community of internet users.

At the time, online advertising seemed like a distinctly outlandish notion.

The internet - then known as the 'information super-highway' - was in its infancy, and there was no guarantee that it would ever attract a big enough audience to make it an effective advertising medium.

What a difference ten years make.
I foresee continued dramatic growth
Danny Meadows-Klue, Interactive Advertising Bureau

Faster download speeds and an ever-expanding range of online services have transformed the internet into a mass media phenomenon, with half the UK population now regularly trawling the web.

This has naturally encouraged other companies to follow where AT&T led, opening up lucrative new business opportunities for advertising agencies.

Sales uplift

According to recent figures from PricewaterhouseCoopers and the Interactive Advertising Bureau (IAB), online promotions are now the fastest growing segment of the UK advertising industry, with revenues on track to reach 500m in 2004, a 40% increase on last year.

This spectacular growth spurt is all the more surprising in that it comes just four years after the dot.com crash, which dealt the internet's commercial ambitions a near-fatal blow.

According to John Owen, planning director at ad agency Dare Digital, the meltdown prompted surviving websites to slash the price of online promotions, allowing advertising to emerge strongly from the wreckage.

"What has driven the recent growth is that as a result of the bust, prices came down sharply, and all sorts of flexible deals became available," he says.

"Offers were at one point almost impossible to refuse. But prices are now set more sensibly, and the sector is very healthy again as a result."

Bonanza

Indeed it is. According to the IAB, online advertising has put the dot.com bust firmly behind it, with revenues now nearly four times what they were at the height of the boom.

Much of this expenditure has come from companies that themselves do a lot of their business online, including banks, retailers, travel agents, and telecoms operators.

Their money has lifted the internet's share of total UK advertising expenditure to 3.2%, within half a percentage point of radio's, and some believe that the web will continue to encroach on the established media in the years ahead.

"I foresee continued dramatic growth," says IAB chief executive Danny Meadows-Klue, arguing that the reach of online advertisements is set to expand further thanks to the spread of wireless laptops and third generation mobile phones.

Even so, many within the industry say that the internet has little chance of supplanting television or cinema in terms of advertising expenditure.

They believe that online advertising will ultimately be limited by the transient nature of internet promotions, which are easily ignored or avoided altogether by web users.

From this perspective, internet adverts essentially belong in the same category as traditional mail shots - a cheap form of mass marketing which can be relied upon to generate a few extra sales, but which can never replace the major brand-building campaigns that are the backbone of the advertising industry.

Way forward

It is clear that many of the companies that advertise online share this restricted view of what internet promotions can achieve.

Up to 40% of UK online ad revenues stem not from banner ads on popular web pages, but from so-called sponsored searches - where firms pay to have links to their websites displayed in response to internet searches for certain key words.

On the other hand, the internet is still evolving as a medium, and online advertising may well be radically different by the time it celebrates its 20th anniversary.

Dare Digital's John Owen points out that the creative standards of online promotions are rising all the time, with designers increasingly moving away from traditional pop-up and banner displays in favour of more compelling, interactive advertisements.

And some forward-looking advertisers - including car maker Volvo - have recently pioneered a trend towards sophisticated multi-media campaigns based on press and TV ads which direct consumers to complementary online adverts.

Could this be the future for online advertising? Log on in 2014 to find out.


SEE ALSO:
eBay cleans up online
21 Oct 04 |  Business
Ads in video games set to rise
20 Oct 04 |  Technology
Yahoo nets sharp surge in profits
12 Oct 04 |  Business
Online advert sales 'set to slow'
08 Aug 04 |  Business


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