Entertainment & Media Outlook for The Netherlands

Transcription

1 associatie Nederland Entertainment & Media Outlook for The Netherlands Internet

2 Broadband, heavy traffic The Internet market consists of spending by consumers to access the Internet and spending by advertisers. We have also added spending on marketing. Voice services that operate over the Internet infrastructure, such as VoIP, are not included. Wired and mobile Internet access consists of fees paid by consumers to Internet service providers (ISPs) and to wireless carriers for Internet access via mobile devices, whether provided as a stand-alone service or as part of a bundle. 92 PwC

3 6. Internet Advertising and Access Spending Internet advertising consists of spending by online advertisers on display, classified, paid search, lead generation, , video and other online formats. It also includes advertising delivered to mobile phones via display ads, video ads, local search, and other formats designed for mobile handset screens. marketing consists of services covering the design, management and execution of an marketing campaign, infrastructure spending, which covers the cost of setting up, managing and sending s, and data, which principally involves renting lists. The Internet is used for communication; to purchase products; for entertainment such as video games, music and movies; for information through search engines; for social networking, and for other purposes. While consumer use of the Internet for transactions is growing rapidly, we do not include that spending in the Internet totals. Online purchases of entertainment and media (E&M) products such as recorded music or online video games are counted in the Music Entertainment and Video Games chapters respectively, because our focus is on the content that is purchased and not the channel used to purchase it. Online purchases of non-e&m products, such as airline tickets, are not included in this Outlook. The Internet is considered a vital technology that provides sustainable economic and social benefits. The Digital Agenda for Europe focuses on the need to support very fast Internet connections. High-speed networks are considered to have the same transformational effect as the development of electricity and transportation networks. While information and communications technologies account for 5 percent of Europe s GDP, they contribute 30 percent in direct and indirect productivity growth. After increasing at double-digit rates through to 2007, growth slowed to 7.1 percent in 2008, and in 2009 spending fell by 0.3 percent, reflecting the impact of the recession, which led to a drop in advertising and slower growth in access spending. Wired Internet access spending rose by only 1.0 percent in 2009 and spending on mobile Internet access increased by 6.4 percent. Mobile advertising also increased, but those gains were offset by a 5.6 percent decrease in wired Internet advertising and a 3.1 percent decline in marketing. We project a 3.6 percent rebound in 2010, followed by progressively faster increases during as underlying economic conditions improve. In addition to the effects of the economic cycle, the Internet market will be limited by approaching broadband saturation. Through to 2007, access spending was fuelled by double-digit annual growth in the number of broadband households. With more than three-quarters of all households now having a broadband connection, further growth in the broadband household universe will necessarily be limited, which in turn will limit overall spending growth even when the economy improves. At the same time, a healthier economy will lead to faster broadband take-up rates compared with 2009 and demand for faster speeds will translate into increases in average revenue per user (ARPU). The result will be an improvement to mid-single-digit broadband spending growth during compared with the 1.6 percent increase in With the dial-up market continuing to decline, total wired Internet access spending growth will average 3.4 percent on a compound annual basis during the next five years. Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 93

4 The mobile Internet access market is becoming significant in the Netherlands, accounting for 12.5 percent of total access spending in 2009 compared with only 5.4 percent in The recession in 2009 led to a slowdown in the take-up rate for mobile access and a drop in access spending growth to single-digits. As smartphones gain penetration, we expect the take-up rate to accelerate, which will lead to a return to double-digit annual growth beginning in For the forecast period as a whole, mobile access spending will increase at a 16.3 percent compound annual rate. Total wired and mobile Internet access spending will expand at a 5.4 percent compound annual rate to 2.6 billion in 2014 from 2.0 billion in Advertising is generally more sensitive to the economy than end-user spending, and that proved to be the case for wired Internet advertising, which fell to 5.6 percent in 2009, a sharp reversal from the 8.2 percent advance in 2008 and gains in excess of 20 percent annually during As economic conditions begin to improve in 2010, we expect wired Internet advertising to rebound, with a 1.3 percent advance. We look for faster increases thereafter as the economy gains momentum and project a return to double-digit annual growth during In addition to the effects of the economy, Internet advertising will benefit during the latter part of the forecast period from faster growth in the number of broadband households. Broadband users visit more websites, download more content and buy more products online than dial-up users, making them more attractive to advertisers. Although projected to improve, broadband household growth will not match the increases achieved during , and similarly we expect that Internet advertising will not match the growth rates achieved during Wired Internet advertising will expand at a 7.1 percent compound annual rate during the next five years as a whole. Growth in the number of people accessing the Internet through a mobile device will expand the potential audience for mobile advertising. Audience growth is generally associated with advertising growth, and we expect advertisers will allocate more money to mobile as the mobile audience grows. We expect mobile advertising to increase at a 33.2 percent compound annual rate from a small base. Total wired and mobile Internet advertising fell by 4.6 percent in We expect spending to increase by 1.8 percent in 2010 and to grow at faster rates during the subsequent four years as the economy strengthens and as mobile advertising comprises a larger share of the total. By 2014, wired and mobile Internet advertising will reach 1.1 billion from 760 million in 2009, a 7.9 percent compound annual increase. Companies have increased their use of marketing. Spending in 2008 was nearly five times higher than in In 2009 however, spending dipped by 3.1 percent to 127 million as the recession led to cutbacks in marketing. As the economy recovers, we expect growth to return to double-digit levels in 2010 with spending more than doubling during the next five years to a projected 284 million in 2014, a 17.5 percent compound annual increase from The overall Internet market will grow to 4 billion by 2014, averaging 6.7 percent growth compounded annually from 2.9 billion in With the Netherlands ahead of Western Europe in Internet penetration, its market is approaching saturation sooner than the region as a whole and will grow more slowly. With the rest of the region beginning to catch up with the Netherlands, the Dutch share has been trending down during the past two years, from 5.4 percent in to 5.1 percent in 2008 and 4.8 percent in We expect that pattern to continue and project the Netherlands share to fall to 4.2 percent by 2013 and remain at that level in PwC

5 Internet Access and Advertising: Wired and Mobile ( Millions) Access Spending Wired Dial-Up Broadband 1,166 1,336 1,555 1,621 1,647 1,692 1,754 1,837 1,935 2,043 Total Wired Internet Access 1,454 1,533 1,693 1,733 1,751 1,789 1,834 1,900 1,981 2,071 Mobile Access Total Wired and Mobile Internet Access 1,537 1,658 1,876 1,969 2,002 2,071 2,163 2,290 2,440 2,606 Advertising Wired Internet Advertising ,050 Mobile Advertising Total Wired and Mobile Internet Advertising ,113 Marketing Total Access, Advertising and Marketing 1,815 2,273 2,705 2,897 2,889 2,992 3,145 3,370 3,658 4,003 Netherlands as a % of Western Europe * * Does not include marketing. Internet Access and Advertising Growth: Wired and Mobile (%) Access Spending Wired Dial-Up Broadband Total Wired Internet Access Mobile Access Total Wired and Mobile Internet Access Advertising Wired Internet Advertising Mobile Advertising Total Wired and Mobile Internet Advertising Marketing Total Access, Advertising and Marketing Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 95

6 100 Internet Access Spending Wired Access The Netherlands has one of the most advanced Internet markets in Western Europe, with 77.5 percent of all households on broadband compared with 60.6 percent for all of Western Europe. Given its high penetration rates, broadband household growth in the Netherlands will necessarily be slower than in the past and slower than the rest of Western Europe. Indeed, by 2014, Western Europe will have nearly caught up with the Netherlands in broadband penetration. Broadband Household Penetration (%) the next five years, the dial-up household universe will decline at a 24.2 percent compound annual rate, while broadband household growth will average 3.8 percent on a compound annual basis. The number of broadband households will increase from 5.78 million in 2009 to 6.95 million by 2014, while the number of dial-up households will fall to only 150,000 in 2014 from 600,000 in Broadband household penetration will reach nearly 90 percent in 2014, while fewer than 2 percent of all households will have a dial-up connection. The total number of Internet households rose by 1.6 percent in 2009 to 6.4 million. By 2014, we project there will be 7.1 million Internet households, a 2.2 percent compound annual increase from Overall Internet household penetration will rise to 91.5 percent in 2014, a 6.0 percentage point advance from Netherlands Western Europe The economy also affects the broadband market. In 2009, the rate of migration from dial-up to broadband noticeably slowed because of the recession. The decline in the number of dial-up households dropped to 7.7 percent from an average of 26.7 percent compounded annually between 2005 and 2008, while growth in the number of broadband households moderated to 2.7 percent from 4.3 percent in 2008 and double-digit gains in previous years. As economic conditions improve, we expect the shift from dial-up to broadband to pick up, which will be reflected in faster growth in broadband and faster declines in dial-up. During Broadband Market The high broadband penetration rate in the Netherlands is in large part the result of significant government investment in the broadband infrastructure. Broadband is now available to virtually everyone in the Netherlands and there is an extensive fibre optic network that has been deployed by the telephone companies. KPN is offering fibre-to-thehome (FTTH) as part of its triple play offering and is providing download speeds of up to 60 Mbps. KPN is also rolling out a VDSL service that will provide download speeds of up to 90 Mbps. Ziggo and UPC, the leading cable modem broadband providers, have deployed fibre in their backbone and are now passing most households with fibre-to-the-curb (FTTC), using the EuroDOCSIS 3.0 standard to provide the last mile connection to the home. Because the coaxial cable component of the connection is relatively short, resistance is minimal and fast speeds can be sustained. The DOCSIS 3.0 modem combines four or more channels into a single channel, significantly increasing bandwidth. With these upgrades, UPC now offers services with download speeds of up to 120 Mbps. Fixed wireless through WiMAX is 96 PwC

7 Internet Households (Millions) Dial-Up % Change Broadband % Change Total % Change Internet Household Penetration (%) Dial-Up Broadband Total Broadband Access Market Subscribers (Millions) % Change Average Monthly Fee ( ) % Change Broadband Access Spending ( Millions) 1,166 1,336 1,555 1,621 1,647 1,692 1,754 1,837 1,935 2,043 % Change Netherlands as a % of Western Europe Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 97

8 also being offered as a last mile solution by companies such as Ziggo. The broadband market in the Netherlands is very competitive and prices are relatively low compared with most other countries, which contributes to the high broadband penetration in the Netherlands. Pricing is being affected by countervailing trends. On the one hand, competition is putting downward pressure on pricing as the leading players are offering special deals and discounts to attract subscribers from their competitors. The bundling of broadband with telephone and television in triple play packages, and in some cases quadruple plays that include wireless, is also leading to lower prices, as the triple and quadruple play offerings provide implicit discounts for each component of the package. On the other hand, broadband providers are offering high-speed premium services at premium rates. UPC s 120 Mbps service, for example, costs an additional per month above the standard fee. There are also options for download speeds at 25 Mbps, 30 Mbps, 60 Mbps and 90 Mbps. With movies and other high volume applications becoming available online, demand for high-speed services is increasing. Until 2009, competition and downward price pressure offset the impact of premium priced high-speed services and the overall average price was generally in decline. In 2009, the average broadband subscription cost per month, down from in We expect an additional 0.2 percent decline in the average price in Beginning in 2011, the impact of improved economic conditions will lead to more subscribers opting for faster speeds. As the proportion of high-speed subscribers increases, the overall average broadband monthly fee will begin to increase as well. We expect the average fee to rise by 3.4 percent between 2010 and By 2014, the average broadband subscriber will pay an estimated per month, up 0.6 percent on a compound annual basis from 2009, although the average monthly fee will still be lower than it was in Broadband access spending will rise from 1.6 billion in 2009 to 2 billion in 2014, a 4.4 percent compound annual increase. During the past four years, as the rest of Western Europe began to catch up with the Netherlands in terms of broadband penetration, the Netherlands share of broadband access spending fell by 1.5 percentage points to 4.6 percent. We expect this pattern to continue as the Netherlands market approaches saturation and the rest of Western Europe narrows the gap. By , the Netherlands share will have fallen to an estimated 3.9 percent. Dial-Up Market The dial-up market has a counter-cyclical element. As a lower cost alternative to broadband, it has been holding up better during the recession compared with previous years. Although declining on a long-term basis as people trade up to broadband, the rate of dial-up subscriber decrease moderated in 2009 and we expect another single-digit decline in Thereafter, as the economic recovery proceeds, we look for the shift from dial-up to broadband to accelerate, with the result that declines in the dial-up subscriber base will also accelerate. Ultimately, the dial-up market will disappear, as the technology is not capable of dealing with most websites that feature graphics, video and audio elements. With the dial-up market already small and declining, there is little to be gained from lowering dial-up fees. During the past three years, dial-up fees have edged up at modest rates. We expect faster increases during the next five years as the subscriber base continues to fall. We project average dial-up prices to increase at a 1.6 percent compound annual rate to per month by 2014 from in Dial-up access spending will fall from 104 million in 2009 to 28 million in 2014, a 23.1 percent compound annual decrease. We expect even larger decreases in dial-up spending in the 98 PwC

9 rest of Western Europe as other countries catch up with the Netherlands in broadband penetration, and therefore experience steeper declines in dial-up. After falling from 3.4 percent in 2005 to 3.0 percent in 2007, the Dutch share of Western Europe s dial-up market climbed to 3.9 percent in 2009, as other countries began to close the gap with the Netherlands with respect to broadband penetration. As that gap continues to narrow, the Dutch share of dial-up spending will continue to increase. By 2014, the Netherlands will comprise 6.8 percent of Western Europe s dial-up market. Mobile Access The Netherlands also has an advanced mobile telephone network. 3G has been available for years and most people now have access to High-Speed Downlink Packet Access (HSDPA), delivering download speeds of up to 1.8 Mbps. WiMAX is also emerging as a mobile Internet technology. In the 2010 auction of mobile Internet licences, Ziggo and UPC joined forces and were awarded a WiMAX licence. Smartphones featuring touch screen capabilities and full keyboards are designed to access the Internet and are becoming more prevalent. As smartphones gain penetration, the mobile Internet access market will expand. Despite the recession, the number of people accessing the Internet through mobile devices, excluding laptop Wi-Fi users, rose 10.6 percent in 2009 to 2.2 million. We project an 18.6 percent increase in 2010 followed by annual gains in excess of 20 percent during , reflecting improved economic conditions and the proliferation of smartphones. By 2014 there will be an estimated 6.2 million mobile access subscribers in the Netherlands, a 22.8 percent compound annual increase from The average mobile Internet subscription cost 9.50 per month in 2009, down from 9.90 per month in We expect growing competition to lead to lower average prices and project that average monthly spending will drop to 7.25 by Aggregate mobile Internet access spending will rise from 251 million in 2009 to 535 million in 2014, a 16.3 percent compound annual increase. The Dutch share of the mobile access market in Western Europe fell from 4.1 percent in 2008 to 3.8 percent in 2009, reflecting a somewhat slower increase in mobile access subscribers in the Netherlands. We expect that share to remain relatively steady during the next five years, fluctuating between 3.8 percent and 3.9 percent, as most countries follow an expansion path comparable to that of the Netherlands. Total Access Spending Total wired access spending will grow at a 3.4 percent compound annual rate during the Dial-Up Access Market Subscribers (Millions) % Change Average Monthly Fee ( ) % Change Dial-Up Access Spending ( Millions) % Change Netherlands as a % of Western Europe Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 99

10 Mobile Internet Access Market Wireless Telephone Subscribers (Millions) Percent of Wireless Telephone Subscribers Accessing Internet Through Mobile Devices (%) Mobile Internet Access Subscribers (Millions) Average Monthly Spending ( ) Aggregate Annual Spending ( Millions) Netherlands as a % of Western Europe Mobile Internet Access Market Growth (%) Wireless Telephone Subscribers Mobile Internet Access Subscribers Average Monthly Spending Aggregate Annual Spending Total Internet Access Spending ( Millions) Wired Dial-Up % Change Broadband 1,166 1,336 1,555 1,621 1,647 1,692 1,754 1,837 1,935 2,043 % Change Wired Total 1,454 1,533 1,693 1,733 1,751 1,789 1,834 1,900 1,981 2,071 % Change Mobile % Change Total Access Spending 1,537 1,658 1,876 1,969 2,002 2,071 2,163 2,290 2,440 2,606 % Change Netherlands as a % of Western Europe PwC

11 next five years, rising from 1.8 billion in 2009 to 2.1 billion in When mobile access is included, total Internet access spending will increase from 2.0 billion in 2009 to 2.6 billion in 2014, growing at a 5.4 percent compound annual rate. In 2014, mobile access will comprise 21 percent of total access spending compared with 13 percent in The Netherlands share of the Western European access market will fall to 3.9 percent in 2014 from 4.5 percent in Advertising Wired Internet Advertising Wired Internet advertising advertising on websites designed to be accessed via computers benefits from an expanding broadband household base and from ad formats that are not available in other media. The broadband household universe is the principal driver of Internet advertising, because broadband users spend more time online than dial-up users and visit more websites, making them attractive to advertisers. In general, an expanding reach leads to above-average advertising growth and the Internet is the only medium whose reach is increasing. Advertisers are allocating more resources to the Internet, not only because its overall audience is growing but also because it allows them to reach young people who are difficult to reach through traditional media. For these reasons, the Internet has been gaining share from other media. Sponsored search advertising through search engines such as Google enables advertisers to target users just when they are looking for specific information relevant to the advertiser, a feature not readily available through other media. Search allows advertisers to target their messages to the identified interests of the user as reflected by the searches they initiate. In 2009, Microsoft teamed up with Yahoo to compete with Google in the search market. Microsoft is providing search technology, including Bing, Microsoft s search engine, while Yahoo has a number of online sites focusing on specific interests ranging from sports to finance, and these offer Microsoft a search platform. Search advertising has been another key driver of Internet advertising in recent years, accounting for 57 percent of total wired Internet advertising in 2009, up from 43 percent in Search accounted for 64 percent of the total growth in wired Internet advertising between 2005 and Lead generation and advertising are other online formats that are not easily duplicated in other media. While much of advertising can be considered lead generation, as defined here, lead generation, an Interactive Advertising Bureau category, consists of fees advertisers pay to Internet advertising companies that refer purchase inquiries or provide information about consumers who choose to provide such information and who choose to allow themselves to be contacted by marketers. advertising consists of banner ads, advertiser sponsorships or links that are contained in newsletters or other communications. These ad formats are often used in conjunction with marketing campaigns. Although much smaller than search advertising, these formats have also been growing faster than overall Internet advertising. Their combined share of total wired Internet advertising rose from 3.6 percent in 2005 to 5.6 percent in The Internet also provides a good platform for classified advertising, because users can sort and select the categories in which they are interested, giving it an advantage over print formats. The Internet allows display ads to be targeted at niche audiences using specialist websites. It also permits demographic targeting and even time-of-day targeting. The Internet also provides a shopping environment, and online commerce has been growing in conjunction with the broadband universe. Advertisers want to reach consumers when they are buying and the Internet provides a means to do that. For these reasons, we expect the Internet to become the leading advertising medium in the Netherlands during the next five years. Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 101

12 This does not mean that the Internet is unaffected by the economy. On the contrary, the recession led to a 5.6 percent decline in wired Internet advertising in Classified advertising, the most cyclically-sensitive of all advertising categories, was affected the most. The recession led to steep declines in classified advertising in all media, including the Internet. Online classified advertising fell by 21.1 percent in 2009 and we expect a further 1.8 percent decrease in As the economy improves, we expect classified advertising to turn around, with growth returning to double-digit rates by , as classifieds benefit from the upside of the economic cycle. Classified advertising will total an estimated 78 million in 2014, up from 56 million in 2009, a 6.9 percent compound annual increase. Search advertising is less vulnerable to economic downturns than other categories because it is a less expensive alternative to brand advertising in traditional media. Nevertheless, search did not escape unscathed and declined by 4.5 percent in 2009 to 425 million. We expect search to rebound in 2010 as the economy begins to improve and to grow at a 7.3 percent compound annual rate to 604 million by Display advertising was more affected by the recession than search advertising, because display faces more substitutes in other media. Display advertising fell by 9.1 percent in 2009 and we anticipate an additional 1.3 percent decrease in We then look for spending to rebound and project mid-to-high single-digit gains during Display advertising will increase from 149 million in 2009 to a projected 184 million in 2014, a 4.3 percent compound annual gain. We expect and lead generation advertising to be the fastest-growing categories during the next five years. Lead generation creates interest in a product or service, typically through online directories, through which visitors interested in a product or service can request information. addresses and other information about the potential consumer, if provided, are supplied to the seller and in some cases to companies offering similar products or services. As they have already expressed an interest, marketing to these consumers generates above-average returns. Insurance agencies, furniture and office supply stores and educational institutions are among the major lead generation advertisers. Lead generation jumped from only 7 million in 2005 to 37 million in 2008, before declining to 34 million in 2009 as the recession led to a reduction in spending. We expect that as the economy recovers, the use of lead generation will increase, particularly by service businesses. Spending will rise to a projected 56 million by 2014, growing at a 10.5 percent compound annual rate from advertising is a small component of overall Internet advertising and a relatively small component of overall marketing, which we deal with as a separate item below. It uses information obtained through lead generation advertising as well as other information to send s to prospective customers. Spending rose from only 2 million in 2005 to 10 million in 2008, before moderating to 9 million in advertising is growing in popularity in conjunction with the increased use of marketing campaigns, as investment in these tends to provide a higher return than in conventional marketing. We expect advertising to increase at a 13.6 percent compound annual rate to 17 million by Rich media, video and other advertising rose 16.1 percent in 2009, the only online category to expand. Rising broadband penetration and increased broadband speeds are making rich media/video advertising feasible options. Video streaming of TV shows that contain video ads is facilitating video advertising, as is the popularity of video sites such as YouTube. We expect this category to increase to 111 million by 2014 from 72 million in 2009, a 9.0 percent compound annual advance. 102 PwC

13 It s all about creating value to the consumer and the advertiser Marieke van der Donk, specialist PwC associatie Nederland Total wired Internet advertising spending will reach 1.1 billion in 2014 from 745 million in 2009, a 7.1 percent increase compounded annually. Advertising per wired broadband household fell 7.9 percent in 2009 to 129 million. We look for a further 1.6 percent decline in 2010 to 127 million, and do not expect a return to the level achieved in 2008 until By 2014, advertising per broadband household will reach 151 million, a 3.2 percent compound annual increase from The Netherlands had a 6.0 percent share of Internet advertising in Western Europe in 2009, down from a peak of 7.8 percent in The decline was principally due to a surge in the UK, the dominant market in Western Europe. We expect the Dutch share to continue to decline to 5.1 percent by 2012, before stabilizing at that level in 2013 and then rebounding to 5.2 percent in 2014 as growth in the UK slows. Mobile Advertising Advertising delivered to mobile phones, excluding test message ads from carriers, is a small but growing segment of the market. Spending totalled 15 million in 2009, nearly twice the 8 million level in Growth in the number of people using their mobile devices to access the Internet is creating opportunities for advertisers. Smartphones, which are contributing to growth in mobile access as they make it easier to navigate the Internet, also provide a good platform for mobile ads because of their larger screens compared with standard handsets. Mobile sites suitable for access by smartphones are emerging, with dedicated advertising that is incremental to wired online advertising. With the number of mobile Internet access subscribers projected to increase from 2.2 million in 2009 to nearly 6.2 million in 2014, growth in the potential mobile audience makes the medium attractive to advertisers. Additionally, mobile phones can reach young people who are often difficult to reach through traditional media. Mobile sites are beginning to sell advertising to third parties, generating growth from a small base. Over time, advertising on mobile television services will contribute to growth in mobile advertising. There is also an emerging business model that offers free mobile telephone subscriptions and other free mobile services in return for accepting advertising. To the extent that this approach develops, it will contribute to mobile advertising. Low mobile ad rates are beginning to attract advertisers, although they are currently limiting aggregate spending. Annual advertising per mobile Internet subscriber averaged only 6.82 in 2009, compared with 129 per broadband household for wired Internet advertising. As the mobile access market expands, advertisers will allocate more resources to mobile advertising. We expect that by 2014, annual advertising per mobile access subscriber will be 12.28, a 12.5 percent compound annual increase from Aggregate mobile advertising will rise to a projected 63 million in 2014, a 33.2 percent compound annual increase from The Netherlands share of Western Europe s total mobile advertising fell from a peak of 8.0 percent in 2006 to 6.2 percent in , before rising to 6.5 percent in We expect that share to decline again during the next three years and stabilize at 5.9 percent during Total Internet Advertising Total Internet advertising will increase from 760 million in 2009 to 1.1 billion in 2014, growing at a 7.9 percent compound annual rate. Mobile advertising will account for 5.7 percent of total Internet advertising in 2014, compared with 2.0 percent in The Netherlands share of total Western Europe Internet advertising fell from a peak of 7.8 percent in 2006 to 6.0 percent in We expect that pattern to continue, with the Dutch share falling to 5.2 percent by Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 103

14 Wired Internet Advertising ( Millions) Search % Change Display % Change Classified % Change Lead Generation % Change % Change Rich Media/Video/Other % Change Total Wired Internet Advertising ,050 % Change Netherlands as a % of Western Europe Advertising Per Broadband Household ( ) % Change Sources: Interactive Advertising Bureau Europe, Interactive Advertising Bureau Netherlands, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Mobile Internet Advertising ( Millions) Mobile Advertising % Change Annual Advertising Per Mobile Internet Subscriber ( ) % Change Netherlands as a % of Western Europe Internet Advertising: Wired and Mobile ( Millions) Wired Internet Advertising ,050 % Change Mobile Advertising % Change Total Advertising ,113 % Change Netherlands as a % of Western Europe Sources: Interactive Advertising Bureau Europe, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates 104 PwC

15 Marketing marketing is a component of direct marketing, which also includes direct mail, telemarketing, SMS marketing to mobile phones, direct response advertising, company websites and other formats. Surveys estimate marketing at approximately 17 percent of total direct marketing spending. With total direct marketing spending at approximately 750 million in 2009, we estimate marketing at 127 million. In general, marketing is used for brand introductions, for customer retention, to generate new business, to promote events and for the ongoing support of a company s products or services. We divide marketing into three principal components: services, infrastructure and data. Services consist of spending related to creating, designing, setting up, executing and analyzing marketing campaigns as well as managing the marketing infrastructure. This is the largest component of the market, representing approximately 60 percent of total marketing spending. Infrastructure spending relates to the delivery of s. It includes spending to make sure that s are delivered and not blocked by spam filters. Companies that provide security and encryption software as well as online trust services that help recipients avoid opening fake s have emerged to serve this market. Infrastructure represents approximately a quarter of total marketing spending. Data consists primarily of list rentals and related services that account for approximately 15 percent of spending. service providers (ESPs) are third-party companies that perform some or all of these services. ESPs have introduced software and automated solutions to manage high volume campaigns, manage timing, and help with delivery. In some cases, ESPs have relationships with Internet service providers (ISPs) to resolve blocking, filtering and anti-spam technologies that may prevent delivery. ESPs also often track and monitor delivery. marketing is being driven by several underlying trends. The general migration of advertising from traditional media to the Internet is also occurring in direct marketing. Companies are shifting resources from direct mail and telemarketing to marketing, which is substantially less expensive. marketing is viewed favourably because has become a staple of the online consumer, potentially allowing marketers to reach virtually everyone who is online. Moreover, the similarities between and traditional mail make marketing an inviting alternative. With enclosures, attachments or links, marketers can deliver an equivalent amount of information and marketing material to consumers as can be distributed through traditional mail, but at a much lower cost. marketing also provides for instantaneous transmission as well as feedback from interested recipients. It can also be easily customized for message, content, and target audience. marketing is also benefiting from the migration of transactional mail from print to . To save costs and address environmental concerns, companies such as banks, energy providers and credit card firms are seeking permission from customers to deliver statements and monthly bills via , thereby saving on printing and postal costs. Transactional is also used for marketing purposes, as statements and bills are often accompanied by new offers. Newsletters and certain types of communication aimed at prospective customers are also gravitating to delivery because of the advantages of lower cost, speed and certainty of delivery. Through , marketers can reach consumers just as directly as through regular mail. At the same time, marketing faces several hurdles. Consumers have privacy and security concerns, and anti-spam software is continuously being upgraded, making it more difficult for marketing to penetrate. Possible regulatory restrictions with respect to privacy could impede growth of marketing. Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 105

16 There are also limitations to marketing. is not an ideal medium for the transmission of high-quality colour and graphics, which limits its effectiveness as a marketing tool compared to traditional direct mail. It is also a one-dimensional medium (sight), compared to sight, touch, and even smell (e.g. perfume) associated with traditional direct mail. marketing is also affected by the economy. The recession in 2009 led companies to look for avenues to reduce costs in the face of declining sales, and marketing expenditure fell by 3.1 percent. With the economy beginning to strengthen, we look for marketing to rebound in 2010 and return to double-digit annual increases during the next five years. Growth will be fuelled by the ongoing migration of resources from traditional direct market to marketing and by the shift in transactional marketing from print to . Spending will rise to a projected 284 million in 2014, a 17.5 percent compound annual increase from Spending on services will be the fastest-growing component, rising at an 18.2 percent compound annual rate to 173 million in 2014, from 75 million in The growing complexity of marketing will boost demand for ESPs. ESPs are introducing new services to attract business and stimulate the market. Several ESPs are focusing on social networks to engage people who may be influential. These initiatives include the launching of viral marketing campaigns that enable people who use brands to provide word-of-mouth endorsements. We project infrastructure expenditure to expand at a 15.6 percent compound annual rate. Delivery and verification will be the principal driver. As marketing becomes more sophisticated and as spam blockers become more creative, the need for verification will increase. Demand for online trust services as well security and encryption software and services will boost infrastructure spending. Infrastructure spending will rise from 33 million in 2009 to 68 million in We project spending on data to grow roughly in line with the overall market, as increased use of marketing fuels the list rental market. Spending will rise at an estimated 17.7 percent compound annual rate to 43 million in 2014 from 19 million in Marketing ( Millions) Services % Change Infrastructure % Change Data % Change Total Marketing % Change PwC

17 Entertainment & Media Outlook for the Netherlands Internet Advertising and Access Spending 107

18 2010 PricewaterhouseCoopers B.V. (KvK ). Alle rechten voorbehouden. associatie Nederland