Google to beat TV in race for ad revenues

Google is poised to overtake Britain’s main TV channels in the race for advertising revenue, underlining the internet’s challenge to traditional media.

The internet search company’s advertising revenue in the UK is expected this year to surpass Channel 4’s anticipated 2006 take of £800m. Within 18 months, it is forecast to overtake ITV1, Britain’s leading commercial TV channel and the country’s biggest single recipient of advertising revenue, according to Mindshare and Initiative, two top media buying groups.

Carat, another media buyer, believes the milestone could be passed as early as next year.

ITV1 accounted for 90 per cent of the ITV group’s £1.63bn total advertising revenues last year.

Media forecasters called Google’s rise “astonishing”. They stressed that their predictions depended on it maintaining its historic rapid growth in a more competitive UK internet market.

Andy Duncan, chief executive of Channel 4, told the Financial Times on Wednesday that Google – which does not comment or guide on future revenues – would earn about £900m in UK revenues this year, compared with £800m at the C4 group.

In the first nine months of 2006, Google’s UK revenues are estimated to have been £593m, with a strong fourth quarter expected for the group. Google UK doubled its advertising revenues in each of the last two years, making it by some distance the company’s biggest single market outside the US.

On current trends, Google UK would still lag behind the ITV group as a whole, once the broadcaster’s digital channel and interactive services were included. But that analysis does not include future revenue from Google’s recent acquisition of YouTube, the video website.

An ITV spokesman acknowledged the trend in advertising but said the group was growing other revenue through sponsorship and digital services.

Dominic Proctor, chief executive of Mindshare Worldwide, said: “On the current figures, the lines would certainly cross in 2008, but that depends more on Google than it does on ITV.”

Mr Proctor, whose group buys media space for Ford and Unilever, added: “We think that Google’s growth is going to be massive in the next two-three years, but there is a limit and it will tail off.”

Mr Duncan described the changes in advertising spend as a “structural change”. “People need to wake up and realise that this is not just a cyclical issue.”

Google’s rapid rise contrasts markedly with the struggles of ITV1, which is expected to decline in revenues by 12 per cent this year because of a fall in audience numbers that has encouraged businesses to spend less on advertising on the
channel.

A Google spokesman said the company’s growth was not a “zero sum game” which had to come at the expense of television.