A couple of days of really quite spectacular data about last year’s growth from the AOP and the IAB.

Yesterday, the AOP (which I happen to Chair) released the results of its annual survey - saying that publishers’ digital revenues were up by 52% and were forecasting growth of some 31% next year. [Read Jemima’s coverage from MediaGuardian here].

Interestingly - ad revenue was up 33% while content revenue went up by 68%. We think the dramatic increase in content comes from a mix of strong B2B players and some of the broadcasters content revenues coming in.

The overall story though was of a fundamental belief in the ad model (80%+ believing the current ad model is sustainable).

Today, the IAB reported on 38% growth across the market to a total of £2.8bn, now more than 15% of the total UK ad market.

You can find a detailed breakdown of the trends behind it on their site - but basically display was up 31%, with banners, skyscrapers and embedded rich media up 45%. And sales houses are now responsible for 40% of the total display market.

Search was up 39%; and classified up a quite staggering 54%.

My thoughts?

1. It’s good to see that publishers (a not particularly precise catch all for content creators) are - give or take - keeping up with the market. In other words, those polled by the AOP were showing none of the slow down in growth that some reports from US newspapers are demonstrating.

2. OK - anyone with a memory better than a goldfish will realise this is now the fifth or sixth year that we’ve seen growth on this scale. Both growth figures are down from last year (the IAB was 41%, the AOP 63%), but even so - this is a striking run of growth for any medium.

3. The other thing is that all of this is only monitoring paid-for media. If you looked at the amount that advertisers are spending online - not to mention the amount of their effort and imagination it is taking up - the story would be even more impressive.

4. The big question of course is what happens next year (or rather for the rest of this year). The drop in housing prices and talk of global financial chaos obviously doesn’t bode entirely well. But that is the topic for another post. Let’s wallow in the good news for a bit.

Actually, I really like that. Not sure I’m quite so convinced about the endless ‘Loading Data’ swooshes that crop up at every click on their new site. [via Nicola Davies]

…when planning something new, whizzy and digital that they just assume is going to be funded by advertising. From Trevor Edwards at Nike. [Quoted here , in Paul Isakson’s future of advertising presentation  and lots of other places, I’m sure]

“We’re not in the business of keeping the media companies alive.We’re in the business of connecting with consumers.”

Just before heading off for Easter, there was a rash of coverage for an Ernst and Young report on ‘the future of national newspapers’. [You can see the E&Y press release here and download the full report here .

The bit that caught my eye was the assertion that eventually got mangled up as ‘we estimate that newspaper websites make between £15 - 20m per year, but they could be making £120m - £250m if they shifted away from a CPM model to more CPC revenues‘.

What they said on the release (and in the clip from the report on the right) was

The CPM (cost per thousand impressions) ad model, used by newspapers online, isn’t generating the necessary growth, according to the report – Media and Entertainment… by numbers. Had the main newspaper websites generated the same revenue per UK unique user in 2007 as Google, which uses a Cost per Click (CPC) ad model, Ernst & Young estimates that they would have earned online ad revenues of between £120 million and £250 million each, just from their UK traffic. But this is hardly the case with many nationals’ total online revenues barely reaching one fifth of this amount.

This is one of those Adam is a man, Adam lives in Reading, therefore all men live in Reading bits of logic. Google uses CPC. Google gets £2.40 revenue per user (according to E&Y calculations), therefore all sites using CPC will generate £2.40 per user.

Anyway, I called Luca the analyst responsible for this who was keen to stress that they weren’t actually saying that we could all increase our revenues by 10X if only we were smart enough to move away from CPM. They were just pointing out the gap..or as they say in the report (which I can guarantee most people won’t actually see).

This gap should be seen as an opportunity for newspapers as it shows that monetising online services in the UK is possible.

Or to be more precise - it shows how monetising the world’s largest search engine and the UK’s largest recipient of ad revenue is possible. Anyway, that’s not quite how it got picked up. EG - this from Forbes

E&Y has calculated that the UK’s main newspaper web sites — The Guardian, Timesonline, The Daily Mail & General Trust and Telegraph titles — could have generated online ad revenues of 120-250 mln stg each in 2007, just from their UK traffic, by charging advertisers on a cost-per-click system.

OK. So let’s be clear - Google’s much higher revenues per user aren’t just because of it operating a CPC model. It helps that those users are actively searching for things and the ads are in direct response to those searches. It also helps to have quite spectacular scale and a completely different profile of activity per user to a newspaper site. It also helps to be active across every possible market. And to operate a hugely efficient demand based pricing model. Oh and having all the power that being the world’s biggest media company kind of helps as well.

We all have CPC elements on our site - either our own deals, or in partnership with Yahoo or Google. I don’t think any of us look at these and think if we were just smart enough to do a whole load more of this, the cash would start flooding in.

In fact - what we have to focus our effort on is doing things that Google can’t do, rather than just aping them. Smarter sponsorship deals. Cross-platform deals. Letting branding ads reach audiences who aren’t specifically searching for anything in particular. Letting advertisers reach specific demographics. The list goes on.

OK. That’s enough. My final thoughts.

1. It’s interesting that in the various bits of coverage, no-one seems to have actually spoken to a publisher to get their feedback on this.

2. Frankly, I think E&Y are being a bit disingenuous - flagging the £120-250m figure and then saying it’s not really what they were saying we could earn..

Avenue A/ Razorfish’s 2008 Digital Outlook Report, one of the better works I’ve read from an agency on the digital landscape. [The intro to Group M’s All change: marketing in addressable media is up there as well, btw].

Guy Kawasaki does a good summary of some of the main points but this bit about digital advertising in a downturn seems remarkably prescient given what’s just happend to Google’s share price

Revenue derived from the cost-per-click ad model is driven by the volume of clicks and the cost a marketer is willing to pay for each of those clicks. While a marketer may keep the same cost-per-click during a recession, it’s quite likely that a difficult economic environment will lead to fewer commerce-driven searches, which leads to fewer clicks. the end result is less money being spent in search.