The internet will overtake radio by next year and become the world’s fourth-largest advertising medium, a year earlier than forecast.

Global spending on internet advertising increased from $18.7 billion in 2005 to $24.9 billion (£12.6 billion) last year, according to ZenithOptimedia, the media-buying agency.

The Middle East and Asia are driving a boom in global advertising spending. Zenith predicted a spike of 7.7 per cent in spending in Asia in the run-up to the 2008 Olympic Games in Beijing.

In the Middle East and Eastern Europe, advertising spending is growing faster than in North America and Western Europe, which are “maturing rapidly” as advertising markets, Zenith said.

Advertising spending in the Middle East increased by 22.4 per cent between 2005 and 2006, compared with growth of 5.2 per cent in America and 4 per cent in Western Europe. Zenith attributed the huge percentage share in the Middle East to the growth in local economies and high oil prices.

In addition to the Olympics, the US presidential election and the European football championship in Austria and Switzerland next year will be the biggest contributors to overall growth during the next two years. However, Zenith noted, the market should brace itself for a fall in revenues after those big events end.

The global momentum towards online advertising reflects trends in the British market, which has received a boost from the uptake of high-speed internet access.

Although spending on traditional media, such as magazines and radio, has been falling in the UK, more than £2 billion was spent on internet advertising in 2006. Online advertising accounts for 11.4 per cent of total advertising revenue in Britain, almost double the global average of 5.8 per cent and above the 7.8 per cent share of advertising expenditure in the US.

Guy Phillipson, the chief executive of the Internet Advertising Bureau, a British trade body, said: “The UK is blazing a trail for the rest of the world. We have been enjoying stellar growth mainly because broadband connections are getting faster and cheaper.”

Mr Phillipson added that the shift towards online advertising was likely to grow as companies come to regard it as less risky and more transparent. Most companies pay on a “per click” basis for search-based advertising, which means that they pay only for the leads generated by the advertisement.

Search engines are the fastest-growing form of online advertising and companies bid to be associated with keywords that are used in searches. The use of annoying pop-ups is declining, but new forms of online advertising, such as video streaming and expanding banners, are becoming more widely used. Behavioural targeting, in which advertisers follow consumers’ internet use, is another growth area.

Despite fears that television advertising was heading for a fall at the end of 2006, Zenith said it had recovered and should be only 0.2 percentage points lower in 2009 than in 2005.

Cinema advertising, especially in the US, is also forecast to grow slightly. Zenith expects no further growth from US newspaper advertising this year and has revised its forecast for magazine growth downwards, describing print performance in America as “disappointing”.

Zenith said the entire UK advertising market was recovering from last year’s stagnation.

— Google unveils its first big assault on television today through a deal to supply adverts to EchoStar, the US satellite network. The internet giant will run auctions for advertising spots on channels such as Discovery, CNN and MTV, which are carried by EchoStar to 13 million US households.

Big movers

World’s ten fastest-growing advertising markets

Predicted percentage growth from 2005 to 2009

Qatar 304.2

Egypt 220.7

Moldova 185.7

Romania 160.4

UAE 154.8

Pan Arab 146.8

Russia 143.2

Saudi Arabia 113.5

Kuwait 113.2

Slovakia 106.4

Source: ZenithOptimedia

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