By Daniel Hunter

In 2002 less than £200 million was spent on UK internet advertising — 10 years later, digital advertising spend crosses the £5 billion mark.

In 2012 digital advertising increased, like-for-like, by 12.5% on 2011 to a record annual high of £5.42 billion — up by £607 million from £4.81 billion according to the latest Internet Advertising Bureau UK (IAB) digital adspend report, conducted by PwC.

Just as digital spend crossed the £5 billion mark in 2012, mobile spend reached its own half billion pound milestone. Fuelled by smartphone ownership hitting almost two-thirds (64%) of the UK population in December 2012, mobile advertising grew like-for-like by 148% to £526.0 million in 2012 from £203.2 million in 2011.

The actual increase of £322.7 million in mobile ad spend over 2011 represents over half (53%) of the £607.3 million increase in total digital ad spend.

Mobile now accounts for 9.7% of all digital advertising spend compared to 1.1% in 2009 — a huge increase in share in just three years.

“Mobile has reached this milestone because marketers are becoming more attuned to the ‘always on’ nature of consumers who expect to engage with content wherever they are. Consequently, advertisers are increasingly buying integrated campaigns across online and mobile rather than regarding mobile as an afterthought,” says Tim Elkington, Director of Research & Strategy at the Internet Advertising Bureau.

"There's simply so much buzz around mobile. In the last 6 months, 20 more of the UK’s top 100 advertisers have produced mobile-optimised websites; 4G mobile ultra-broadband is enabling a new era of richer content consumption and tablets are being predicted to outsell PCs in 2013. This will help maintain mobile’s significant momentum in attracting both consumer attention and advertising pounds.”

Even without a prevalent 4G network, mobile video advertising grew 1,601% from £0.8 million in 2011 to £13.0 million in 2012. Total mobile display advertising (including video) increased like-for-like by 121% to £150.0 million in 2012. Mobile search grew like-for-like by 164% to £365.0 million — accounting for 69% of mobile ad spend.

The remaining £11 million of mobile ad revenue is primarily accounted for by classifieds, SMS/MMS and other smaller advertising formats.

Display advertising across the entire digital landscape, boosted by the increase in video and social media advertising, grew in line with the market at 12.4% on a like-for-like basis to £1.30 billion from £1.14 billion in 2011, representing a 24% share of digital ad spend in 2012.

Video advertising grew 46% to £160.0 million from £109.0 million, accounting for 12% of online and mobile display in 2012; up from 10% in 2011. In the last three years video ad spend has increased almost six-fold (471%).

Social media advertising grew 24% to £328.4 million from £265.0 million. In the last three years social media spend has increased almost four-fold (383%).

Online and mobile sponsorship advertising grew 34% to £65.7 million from £49.0 million, accounting for 5% of digital display. In the last three years digital sponsorship spend has increased 128%.

Online in-game advertising revenue grew 30% to £23.4 million from £18.0 million in 2011.

Paid-for search marketing increased 14.5% on a like-for-like basis to £3.17 billion from £2.77 billion — representing a 58% share of digital advertising.

Classifieds grew 6.3% like-for-like to £853.8 million from £788.0 million — accounting for 16% of digital ad spend in 2012. Recruitment classifieds showed strong growth of 7.6% from £276.6 million in 2011 to £297.7 million in 2012.

The consumer goods sector (FMCG) overtook the finance sector as the biggest spender on digital display advertising — accounting for almost 16% of display ad spend in 2012. FMCG’s share has almost doubled in the last three years — from 9% in the first half of 2009 — as FMCG marketers have realised digital’s ability to deliver brand awareness, particularly as an amplifying element in integrated media campaigns.

“The advertising market is shifting toward storytelling and integrated campaigns which give greater prominence to video and display formats with a higher degree of interactivity with the target audience," Anna Bartz, Senior Manager at PwC, said.

"Over the past two years, the digital advertising revenue model has also changed from an emphasis on direct response to being more about branding and awareness.”

The top five display advertising sectors in 2012 are completed by finance (15%), entertainment & media (13%), retail (12%) and technology (9%).

In comparison, across mobile display only, entertainment & media are the top spenders (accounting for 16% of mobile display only) followed by consumer goods (13%), retail (12%), finance (12%) and technology (11%).

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