Jan 30, 2008

Global Landscape Trends

So, the whole world is watching the ups and downs in the US economy. It's clear that, key G8 Countries and Emerging Markets alike, are feeling the effects of the recent downturn in US Markets. Recently - I've taken an interest in reviewing the Online landscape across Key Global Markets. It would be interesting to find out how these WW Market Trends, impact Online Advertising Spend in general. Below, I present a brief overview on the prevailing online trends in a number of key Markets.
In Australia, Online advertising again set new records in 2007, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. Revenue for the first six months of the year came to almost $10 billion, marking a 27% increase over last year, according to a report released this morning. Search accounted for almost $4.1 billion -- 41% of the total and more than any other type of adformat. While paid search has played a big role in the growth of online advertising in general, the report indicates that search's role is becoming even more important. Last year, search garnered a slightly lower share -- 40% of the total.

Led by spending in rich media and video ads, display ad revenue also increased to nearly $3.2 billion, or 32% of the total. Last year, display revenue totaled $2.4 billion, or 31%. In other categories, classifieds lost market share, coming in at $1.7 billion, or 17% of total revenue, compared to last year's 20% ($1.6 billion). Email held relatively steady at 2% ($200 million). Referrals and lead generation increased to $799 million, accounting for 8%, from last year's $592 million (7%). According to Zenith Optimedia, The Internet Advertising Bureau and PriceWaterHouse Coopers, Australian Businesses are allocating around 14% of their total advertising budgets in online advertising (including search, classifieds and display). The online share of total advertising budget in Australia is even higher than in the UK. Australian Businesses seem to have a more mature attitude towards online advertising. On the other end, New Zealand seems to be far behind.

According to the latest figures from the Interactive Advertising Bureau in October 2007, the total amount spent in online advertising in Australia in 2007 is $1 billion . The figure has strongly increased compared to the $620 Million from last year. According to the IAB the Global online advertising market is divided between: Search, which accounts for 41% of the online advertising revenues, Display - 32%, Classifieds - 17% and Referrals - 8%.

Last year, major Australian advertisers were on course to spend up to 22% of their total advertising dollars online. Display ads, Classifieds and Search currently dominate the online advertising landscape, with Search & Classifieds poised to capture nearly half of Australian online ad spending in 2007. (Source: Roy Morgan Research).
Australian advertisers are generally bullish on Internet advertising, partly due to a strong growth in broadband adoption. eMarketer estimates that 78.7% of Australian households will have broadband by 2011, up from 45.4% in 2006 — and the country will pass Japan to become second in penetration only to South Korea. Online advertising in Australia is booming, with revenues having surpassed $1 billion (AUD) in 2006 and year-over-year growth reaching 62 %; Revenue was up in all main categories, with strong growth in paid search (more than 100% growth), general advertising (48%), directories (60%) and classifieds (49%). Search Revenue is estimated to grow to $975 million by the end of 2010, a CAGR (compound annual growth rate) of almost 40%, followed by General Advertising (48%); Directories (60%) and Classifieds (49%).

Online advertising spend in Britain grew 41 percent in the first half of 2007 to give it a market share of almost 15 percent. The Internet Advertising Bureau (IAB) in a report compiled with PricewaterhouseCoopers and the World Advertising Research Centre said online ad spend in Britain could reach a new high of 2.75 billion pounds ($5.6 billion) by the end of the year. The growth puts online ad spend above the size of the direct mail sector, which had a market share of 11.8%. 90% percent of Internet users are on broadband now and nearly 40% use wireless. The total British advertising market grew 3.1% in the first half of the year to 9.1 billion pounds. All major online ad formats surpassed expectations, with classified ads growing 72% year-on-year as marketing budgets steadily switch from print to online. Internet ads are expected to represent 18% of all UK advertising spending in 2007—more than double the percentage in the US, or in any other European country. Internet display advertising (including banners, skyscrapers and rich media formats) climbed 33% to £287 million and a share of 21.5%

Search advertising revenue was up 44% year-on-year to £762.3 million, a share of 57.1% of the online total. Growth is attributed to at least half of all ecommerce transactions (£32 billion in 2006) starting with a search. In July 2007 internet users carried out 1.4 billion search queries and over 80% of these resulted in a click through to a website.

Key Growth Drivers
Broadband: Now in 10 million UK households. 65% of the UK population is online, 89% of at-home users are on broadband and a third of them use wireless. Online video: Faster, cheaper broadband means marketers are increasingly experimenting with video and more engaging, creative advertising or rich media (graphics, audio, video or animation) adverts. These advertisers recognize that video is a catalyst for staying online for longer and awareness is higher when video ads are employed. The increase is more than twice as high when video ads are used compared with the increase in ad awareness across all online display ads (source: DynamicLogic).

Canadians use the Internet more than anyone else in the world. According to Comscore (responsible for all the stats in this paragraph), we spend more time online, have more wired households, are more sophisticated in our online behavior, do more searches. In most online metrics, Canada is amongst the overall leaders World Wide when it comes to online usage, averaging 40 hours a week, followed by Israel with 37.4 and South Korea with 34.
The U.S. is in 8th place with 29.4. Canada also leads the pack in online reach, with 70% of households wired. This time, the U.S. comes in second with 59%. Average pages viewed per visitor? Canada comes in tops with 3800. The U.K. is second with 3300 and the U.S. clicks in with 2500. Canadians are amongst the world’s best online shoppers. Canadians spend $28.05 in online advertising per Internet user.
The US spends $71.43. 21% of Canadians media usage is online, but it gets 6% of the budget. In contrast, newspapers and magazines get a 7% share of total media usage, but capture 42% of Canadian ad budgets; The U.S. spends almost twice as Canada per capita on search marketing.

In 2006, the Canadian Online Advertising Revenues surged to an unprecedented $1.01 billion dollars for the year. This represented a 26% increase over the $801 million originally estimated by the IAB for 2006; and an 80% increase over the 2005 actuals of $562 million. Of the $1.01 billion, approximately $208 million or 21 percent of ad dollars were allocated to the French Canadian Online market, representing growth of 68% over the 2005 actuals of $124 million.

2006 Canadian Online Ad Revenue by Advertising Vehicle was as follows:
  • Display advertising (including banner CPM and direct response advertising, plus contests, sponsorship and micro sites) - 36%;
  • Search advertising - 35%;
  • Classifieds/Directories - 27%; and, Email - 2 %

Internet penetration and online marketing have grown and France is the third-largest online advertising spender in Europe, behind the UK and Germany. The France Online Advertising report analyzes the forces driving France's emergence as one of the leading Internet advertisers in Europe. Online advertising campaigns are fairly new to the French, and many French companies still put the bulk of their online efforts into Web sites and e-mail designed to communicate brand messages. But the country's big brands are beginning to experiment with blogs and other new techniques, including mobile advertising. eMarketer estimates that the French online ad market will grow at a rate of more than 34% during 2007, and total over $4 billion by 2011.

Germans have made the Internet an integral part of school and work. Online penetration is over 50% for every age group 50 and younger. With over 40 million active Internet users, Germany is home to Europe's largest online population, and two out of three German Internet users are online buyers. Comfort with the Internet has helped make Germany a nation of active online shoppers, predicted to spend over $108 billion in 2008. According to Futurezone, the online advertising market in Germany is expected to exceed 800 million Euros in 2007.

That’s a 67% over the 480 million Euros seen in 2006. The figures are from the Bundesverbands Informationswirtschaft, Telekommunikation und neue Medien (BITKOM) run by Germany’s national newspaper “Die Welt”. This forecast for the full year is based on an increase of 68% in the first three quarters of the year. The European online market is growing very rapidly indeed. Germany is the largest economy in Europe and this pace of growth may eventually take it ahead of the UK. Currently, Germany, France and the UK dominate European e-commerce, accounting for 72% of total online sales. A comprehensive pan-European online advertising study by the Internet Advertising Bureau, (IAB) found that UK, Germany and France were the three dominant markets in terms of overall online ad spending.

Nowadays, in South Korea, online trends are moving from the traditional DSL to 100Mbps service and the number of subscribers for the latter has been increasing since 2006. Korea has high user engagement and is dominated by multimedia user generated activity. The market is dominated by major local players, who operate effectively “closed” networks, differentiating their search and portal products through the quality of their proprietary user generated content. Online Advertising continues to grow rapidly. According to Korea Software Industry Promotion Agency, Korean Online Ad market has grown by 60 times during the last 10 years. As Internet users increased explosively since the 90s, so did the ad market, and Korean Online Ad market is expected to reach US$ 1.16 billion in 2007. That is about 42% higher than last year’s US$ 0.82 billion. The market was only US$ 19.3 million back in 1997, but has doubled every year ever since then, resulting in US$ 35.2 million in 1998, and US$ 75.2 million in 1999. The market has grown 5983% in the last decade. The percentage of Internet ad in total ad market has increased too. It was only 0.4% in 1997 but has become 11.7% last year and is expected to score 16.2% this year. That is relatively high compared to 8.3% in the US. In another survey by the agency, Korea is the 5th largest online advertising market in the world. Overall Online Ad market is growing rapidly with 24% CAGR (at $1.35bn FY07 – $2.8bn FY10 at 27% CAGR) and Search Ad is leading market growth with 26% CAGR.

Unit: US$ million - Resource For Korea’s Online Landscape: http://isis.nida.or.kr/eng/

Italy is a faster growing market for broadband users: at the mid2007 we had 9M of broadband users, Italy is the fourth-largest market in Europe and 8° Worldwide. 97% of broadband users are on Adsl.(Source: Agcom, July 2007). Google is the clear leader of the Search market with about 90% of queries share (considering also syndicated portals). In below graphs elaborated with internal data we can see a snapshot of adv spending in Italy. In 2006 the online adv market in Italy was 4.6% of total adv spending in Italy. In 2007 the Internet adv will growth to 6.3% and the Forecast for 2008 is 8%. By the end of 2010 Internet will reach the 10% of the overall adv spending. (Sources: AssoComunicazione & NNR, October 2007 )

Mexico’s Internet population is 23.6Mio at the end of 2007, representing an online advertising market of 82Mio USD. Internet population will be 39.5 million users by 2011, and online advertising expenditure will be 192Mio USD, therefore growing at a CAGR of 24% over the next 4 years.
ProdigyMSN is the 2nd most popoular search engine in Mexico, with 4.7% query share, ahead of Yahoo at 4.0%. ProdigyMSN is the current leader in online advertising, therefore could efficiently upsell search marketing. ProdigyMSN benefits from the Joint Venture with Telmex (70%+ market share in Internet access), which gives exclusive access to the YP database for the local search solution, and enables an on-going plan of distribution of the Windows Live Toolbar.
Investments in the Spanish version of our Search engine would benefit the current 110+ Mio Spanish speaking Internet population.

By 2011, eMarketer expects Mexico’s Internet population to swell to 39.5 million users and Mexico’s online ad revenues are expected to reach $192 million. Mexico was slow to embrace the Internet, but that is changing rapidly. Mexico’s online advertising market grew 85.2% in 2006.The country now accounts for one-quarter of online ad spending in Latin America

In several aspects of its Internet usage, Mexico resembles more developed countries such as South Korea, Britain or the United States. The Mexican Internet offers the kind of demographics that marketers seek: young, affluent, urban. Mexican Internet users have embraced trends such as social networking, blogging and online video. And with just 15% of the country’s households on broadband, according to Reuters, clearly there is room for growth. (Source: eMarketer November 2007). According to Pyramid research, 75% of the population will own a mobile by 2011. ZenithOptimedia ranked Mexico ninth in terms of its contribution to global ad spending between 2005 and 2008.

ProdigyMSN is currently the market leader both in reach (85%+, source: Comscore) and advertising sales (estimated 50%, source: IAB). Therefore we consider we could quickly play a significant role in search, up-selling to our premium advertisers, once we have control of a monetization platform. Our query share in search was 4.7% in October, which gives us the #2 position in the market (.7pt ahead of Yahoo, source Comscore November 2007) and one of the highest query shares among MSN countries. We also count on our joint-venture with Telmex (70%+ internet access market share), which offers perspectives of Search distribution (current project of Windows Live Toolbar distribution to Telmex ISP customers).

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