European online advertising up 40% year to £9bn

Europe’s online ad market is growing by 40% year on year across the continent, according to the Interactive Advertising Bureau Europe (release).

In 2007 the European online advertising market was worth €11.2bn (£8.88bn), up from €7.2bn in 2006. The news means the market is closing on the US online ad market, which increased by only 26% during the same period to €14.5bn.

The IAB’s research also found – unsurprisingly enough – that two-thirds (65%), or €7.3bn, of European online ad budgets in 2007 were spent in the UK, Germany and France. Somewhat more interesting is some smaller markets experienced high growth rates – Greece increased 91%, Spain rose 55% and Slovenia hit 49%.

This is great news of course, but as upbeat the ad market looks, there still remains the question of how all these trillions of ad impressions, keyword searches and the like are going to monetised across myriad online channels. When I used to write about the online ad-market for New Media Age (1996-2000), speaking to media buyers usually came down to the issue of buying points. If one buying point could service them with a billion impressions, they go with that, rather than funnel their budget across a long tail of niche blogs and networks which would just take more time for them to manage and prevent them from going to lunch, or the pub, early.

Of course, we are further on from those unsophisticated days (although plenty of media buyers still think in this manners, especially those making the painful transition from TV, as ad budgets switch to online). But it is not so much this clunky media model that is exercising the minds of Venture Capitalists – who invest in new media vehicles like social networks – so much as how do you cut out waste?

Nic Brisbourne of DFJ Espirit thinks Vendor Relationship Management, may be the answer:

“the beauty of VRM is that it eliminates the waste on both sides of the advertising equation – most adverts that suppliers pay for hit people outside their target market, and as consumers most of the ads we watch are not interesting to us. With VRM suppliers get to focus their communications 100% on people who are interested in their message (a key enabler of conversations).”

But where does that leave the media business or social networks with lots of inventory? Hard to say, but it does rather imply that they need to think in terms of facilitating these transactions, or get cut out of the equation – perhaps they’ll need to carry some kind of terribly smart VRM widget instead of adverts…

Meanwhile, other VCs are yawningly bored by the idea that Web 2.0 and social sites won’t make any money – from advertising or otherwise – as they are confident, as Max Niederhofer is, that “Non-social software will be as unimaginable then as the DOS command line GUI of 25 years ago is today.”