The advertising industry is in transition, moving from an old above-the-line/below-the-line position to one that is driven by the Internet and the massive increases in online spending and that is better described as `through the line'.

By exploiting the opportunities the Internet presented to create niche markets for themselves in Web design and build, search-engine optimisation (SEO) and e-mail marketing, entrepreneurs have developed their creativity to the extent that many may now be classified as digital marketing or digital advertising agencies in their own right. It is in this sector that the most creative use of new technologies is to be found and the larger global media organisations have been snapping these up to add to the services of the
long-established agency brands in their portfolios. Some of the most creative — and award-winning — independent agencies are resisting such takeovers and fiercely defending their leading-edge positioning; these are highlighted in this report.

The digital age is bringing about fundamental changes in the way in which both the media industries and advertising agencies operate. The traditional broadcast and print media are having to reinvent their finance models in order to compensate for declining advertising revenues as advertisers chase audiences across the plethora of media platforms that are now available. Some media owners are embracing the opportunities provided by digital media and redefining themselves as content owners. Others are, arguably more clumsily, looking to consumers in order to compensate for lost revenues, seeing interaction through, for example, phone-ins, texting and video on demand (VoD) as the way forward.

Advertisers, keen to promote their carefully-built brands across all platforms, are dependent on new thinking to help them, but are aware that their global brands, handled by global agencies, might be missing opportunities in the digital arena. This is how relatively small independent agencies can win business from superbrands such as Coca-Cola, McDonald's and Yell.

As a result of such moves, advertising agencies face the issue of how to integrate their services to service clients across multiplatforms as well as being aware of developing markets, such as China and Brazil.

Consumer attitudes are also changing. The previous edition of this report, published in 2005, focused on the increasing awareness of the problems caused by obesity, especially in children. As a consequence of this awareness, the Government focused on how foods high in fats, sugars and salts (HFSS) were marketed to children. The outcome was a ban on advertising such foods during children's programming, with a further ban to be phased in over the course of a year to remove such advertising around any programmes of which the audiences comprise a sizeable number of under-16s.

Key Note commissioned its own research to discover how attitudes towards food advertising had changed since its previous Market Assessment report on Advertising Agencies and found that a staggering proportion of respondents now believe that it is parents' responsibility to teach children which foods are healthier than others: over 96.8% in February 2007, compared with 59% in October 2004 when the survey was last conducted.

Another controversial advertising sector is gambling. In September 2007,
the rules around advertising gambling change in the UK, with advertisements promoting certain gambling activities, such as the new `super-casinos', being permitted on television for the first time in the UK. Key Note's survey asked respondents whether they thought allowing advertising for gambling on television would be a mistake. Nearly two-thirds (66.1%) of the sample agreed that it would. The industry is placing strict controls on the nature of the advertisements but it would seem (from Key Note's research findings) that this has not filtered through to the viewing public.

Despite falls in some sectors, there have been massive rises in others and the overall picture for the advertising industry is positive. For many, the changes are as exciting as the initial dotcom boom; however, with lessons learned from that time, new ventures are tempered with financial caution. Clients can trust their digital partners to deliver and, while the changes may make some media owners and some established agencies uncomfortable, for some there has never been a better time to be working in advertising.

This report takes a comprehensive look at the advertising industry, with
in-depth reviews of the different marketing sectors: broadcast, print, Internet and digital media as well as cinema, outdoor and direct mail (DM) advertising. With research drawn from many different sources (all of which are authorities in their own sectors) and collated in a meaningful and informative way, with Key Note's own commentary, this report provides an essential focus on this fast-moving and dynamic industry.

Executive Summary

1. Introduction
OVERVIEW
DEFINITION
Job Functions within the Advertising Industry
Account Team
Creative Team
Media Buying and Planning

2. Strategic Overview
MARKET DYNAMICS AND SEGMENTATION
Market Sectors
Total Industry Value and Growth
DISTRIBUTION
Industry Profile
COMPETITIVE STRUCTURE
INDUSTRY ISSUES
Television Advertising of Food and Drink Products to Children
Simulcast Broadcastings
Advertising Industry's Rallying Call
New Media — New Audiences — New Communications
Ban on Gambling Advertisements to be Lifted
THE CONSUMER
Digitally Connected Audiences
MARKET FORECASTS
Economic Forecast
Forecast Growth in Advertising Expenditure

3. Broadcast Media
TELEVISON
Background
Convergence
Market Size
Digital Take-Up
Advertising Expenditure
RADIO
Background
Market Size
Audience Sizes
Advertising Expenditure
MARKETING ACTIVITY
COMPETITOR ACTIVITY — AWARDS
Award Winners
British Television Advertising Awards, March 2007
BTAA Gold Awards
Cannes Lions Awards, June 2006
Creative Circle Awards, March 2007
D&AD Awards, May 2006
MCCA Best Awards, March 2006 (2007 Awards Presentation: April)
RAB Aerial Awards
Roses Advertising Awards, May 2006
COMPETITOR ACTIVITY — ADVERTISERS AND AGENCIES
Top 10 Radio Advertisers and Agencies

4. The Internet
BACKGROUND
MARKET SIZE
Audience Sizes
Advertising Expenditure
CONSUMER TRENDS
MARKETING ACTIVITY
Awards
British Interactive Media Association Awards, November 2006
Internet Advertising Bureau Creative Showcase Awards 2006
New Media Age Effectiveness Awards, June 2006
Cannes Lions Awards — Cyber Lions Winners 2006
Revolution Magazine Awards, March 2007
COMPETITOR ACTIVITY
MOBILE MARKETING

5. Print Media
BACKGROUND
NEWSPAPERS
Market Size
MAGAZINES
DIRECTORIES
CONSUMER TRENDS
MARKETING ACTIVITY
COMPETITOR ACTIVITY

6. Other Media
BACKGROUND
MARKET SIZES
CONSUMER TRENDS
MARKETING ACTIVITY
COMPETITOR ACTIVITY
Cinema Advertising
Outdoor Advertising
Direct Mail

7. An International Perspective
MARKET DEVELOPMENTS
COMPETITOR ENVIRONMENT
CONSUMER BEHAVIOUR

8. PEST Analysis
POLITICAL FACTORS
ECONOMIC FACTORS
SOCIAL FACTORS
TECHNOLOGICAL FACTORS

9. Consumer Dynamics
OVERVIEW
PARENT POWER
Parents Should Teach Children Which Foods Are Healthier Than Others (S1)
Parents Should Explain To Children That They Cannot Believe Everything An Advertisement Says (S2)
Ban It
The Government Should Counter Advertising For Foods That Are High In Fat, Sugar Or Salt By Subsidising Advertising For Fresh Fruit And Vegetables (S3)
All Advertising Of Processed Foods, Snacks And Soft Drinks, And Products High In Salt, Sugar Or Fat, Should Be Banned (S4)
A MATTER OF TRUST
If A Food Advertisement Is Allowed To Be Broadcast On
Television Then The Product Must Be OK (S5)
I Trust The Big Brand Names Not To Sell Anything Harmful
To Health (S6)
SO MUCH INFORMATION, SO LITTLE TIME
I Am More Likely To Buy A Product If I Have Seen An
Advertisement For It (S7)
I Do Not Have Time To Read Labels (S8)
Which Media?
I Find Television Advertisements Generally Inoffensive
And Often Entertaining (S9)
Better Information Appears In Newspaper And Magazine
Advertisements Than In Television Advertisements (S10)
DON'T BET ON IT
It Is A Mistake To Allow Advertising For Gambling To Appear
On Television (S11)
Pick and Click
I Sometimes Click On The Advertisements Column When Using A Search Engine Such As Google (S12)
I Have Gone To A Website For A Product To Play A Game There,
Or Get A Special Offer (S13)
Now You See Them, Now You Don't
I Barely Notice The Advertisements On The Websites I Visit These Days (S14)
The Online Advertisements Are More Sophisticated And More Fun Than They Used To Be (S15)

10. Company Profiles
INTRODUCTION
OMNICOM GROUP INC
Corporate Information
Brands
Product/Brand Development
Appointments
Profitability
Future Company Developments
WPP GROUP PLC
Corporate Information
Brands
Product/Brand Development
Appointments
Profitability
Future Company Developments
GCap MEDIA PLC
Corporate Information
Brands
Product/Brand Development
Appointments
Profitability
Future Company Developments
VIRGIN MEDIA INC
Corporate Information
Brands
Product/Brand Development
Virgin TV
Virgin Broadband
Virgin Phone
Virgin Mobile
Appointments
Profitability
Future Company Developments
MOTHER HOLDINGS LTD
The Company
The Awards
The Work
New Business
AKQA LTD
The Company
The Awards
The Work
New Business

11. The Future
OVERVIEW
FORECASTS

12. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Improves
Willingness to Borrow Slips Slightly
SPENDING FROM SAVINGS
Slight Increase in Spending from Savings
Saving Grows in Relative Importance

13. Further Sources
Associations
Publications
General Sources
Government Sources
Other Sources
Bisnode Sources