August 11, 2006 8:12 AM PDT

In U.K., online advertising overtakes magazines

Online advertising in the United Kingdom raked in $2.48 billion last year and is now worth three times the U.K. radio-advertising market, Ofcom's annual report into the communications market has revealed.

Now the fourth-largest display advertising medium in the U.K. behind newspapers, television and direct mail, online outstripped outdoor advertising in 2005, as well as the business and consumer magazine markets.

The situation was described Thursday as "almost unthinkable, going back two years" by the regulator's chief operating officer, Ed Richards, who said the online-advertising market was now more than a third as big as the television market.

Two big advantages of online advertising are its targeted nature, which generally suits the niche nature of the Internet, and the ability of advertisers to closely track results, which has in turn led to a variety of specialized advertising arrangements, such as cost per thousand (known as CPM in the United States) or cost per click (also known as pay per click).

Ofcom's report, published Thursday, also hinted at another reason why online advertising is taking off--people are using broadband Internet more and traditional media less, particularly in the lucrative 16-to-24 age bracket.

The report suggested that this might partly be because this age group has a "higher ownership of most new technologies than the population as a whole," though there is also evidence of an inherent cultural shift. Seventy percent of Internet users ages 16 to 24 have embraced activities such as social networking and blogging--half of them on at least a weekly basis.

Overall, from 2001 to 2005, U.K. radio consumption fell by 24 minutes a week across all adult age groups, with local commercial radio the biggest loser. Internet usage went up by 19 minutes, while television gained 11 minutes of viewing time.

David Meyer of ZDNet UK reported from London.

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