From interruption to interaction, online advertising has progressed quickly in the last few years, says Steve Nimmons of Atos Origin.

Online advertising has been with us since the earliest days of the internet and where eyeballs meet content, advertisers will be close by. The first web portals were (almost uniformly and tastelessly) bedecked with every imaginable flashing widget that might attract a valuable click-through. I will spare the early designers' blushes but some sites would today come with health warnings for photosensitive epilepsy. Quality had to, and did, improve.

As the popularity of home computing exploded throughout the 1990s we experienced year-on-year exponential growth in the online community. Statistics for 2007 indicate that some 32.5 million people in the UK are now online, spending 16 hours per week on the internet.

Online advertising in the UK in 2007 hit £2.8bn and is currently running at nine times the level of growth of the entire sector. There has been a £2bn leap since 2003, a trend that can be linked to the strong uptake of broadband technologies (now with 90 per cent of the market penetration) and the richer experience offered by web 2.0.

Spending on internet advertising in the UK now exceeds that of press classifieds and regional newspapers. Video sharing services have also played a large part in this success, as advertisers have been able to use richer media and viral marketing. Search currently accounts for 57.1 per cent of all online advertising, display 21.5 per cent and classifieds 20.8 per cent.

Google's headline advertising revenues have even surpassed ITV1's, a landmark in the competition between traditional commercial advertising and internet media. UK ecommerce revenue predictions (Forrester UK ecommerce Forecast 2006-2011) foresee a rise from £30.2bn to £52bn by 2011. It is clear therefore that this is a burgeoning market and year-on-year spending growth exceeds 38 per cent (in the UK alone).

Web 2.0 has further 'tipped the scales'. I describe web 2.0 as having rebalanced the content producer to consumer ratio, enabling a very simple entry point to web participation and content creation and distribution. In real terms this has led to massive growth and fragmentation of the delivery network.

This is characterised by the appearance of tens of millions of blogs, disparate, niche content and entrepreneurs vying for a slice of the monetised blogosphere. Improvements in mobile technologies have created new opportunities to reach audiences.

Social networks, blogs, wikis, video and picture sharing, chat services, forums and many others are competing for attention that used to be the preserve of radio and television entertainment and print media. Social networks are serving up captive audiences in huge volumes, which is quintessential catnip to advertisers.

But there is a problem. Advertising quality issues, abuse, the 'malware of adware', volume overload, relevance and level of interruption have been areas of traditional frustration and contention. The web is packed with affiliate programmes and advertising networks.

Google (for one) has been trying to provide better quality click through on sponsored links and suffered market turbulence in March when their 'quality not quantity' strategy resulted in a significant downturn in click-through growth. Advertising solutions are admittedly sophisticated but are they really delivering utility to consumers and sellers in line with our changing needs and expectations? What are the emerging challenges and opportunities we will face going forward?

There have been some reasonable attempts at contextual advertising and this is being extended with interesting work in behavioural targeting. I worked in data mining research back in 1993 and remember having many discussions about the way in which the web would emerge as the greatest profiling and personalisation experiment of all time.

I foresee increased velocity in the development of behavioural targeting, but this necessitates behavioural profiling and hence collection, storage and processing of personal data. Social networks and advertisers are keen to leverage this, but have had a great deal of difficulty in selling the concept to users. My view is that, while users would be perfectly receptive to the results, they are not at all comfortable with the means.

Considering that online privacy, phishing, identity theft, data protection and data security are high on everyone's agenda, and with low levels of trust and high profile data security failures (from social networks to government departments) a great deal of work is needed to quell fears. It really does boil down to trust and ISPs, social networks, traditional sites and advertisers must provide adequate security, transparent policies, opt-outs (many would prefer opt-ins), anonymity, data protection and data destruction.

I would also advocate increased regulation of what information can be collected and sold (although we should not forget parallels with loyalty schemes in the offline world). There have been many examples of negative press in the past number of months concerning Facebook/Beacon, Phorm, deep packet inspection, user privacy, social networking security, preservation of anonymity and many others.

Although largely interruptive in nature, advertising sponsored software as a service solutions (SaaS) are interesting. Offerings such as Microsoft AdCentre equip SaaS suppliers to design and operate targeted ad funded services. Advertising fulfils a role therefore in innovations that provide utility to the consumer by reducing (or removing) total cost of ownership. Of course this has been a characteristic of advertising in the online domain for many years.

The semantic web will add another dimension as it begins to free us from the limitations of traditional key word searches. The semantic web will also be a less contentious mechanism for serving (improved) contextual advertising. There are currently some really interesting innovations in corporate marketing (products, services, and jobs), B2B / B2C and others in virtual environments such as Second Life.

A number of large IT companies (Microsoft and IBM in particular) are leading the way with interactive demos, virtual meetings and presentations, virtual sales representatives and self-service 'kiosks' linked to assets on corporate websites. As we edge towards web 3.0 a lot of harmonisation and platform aggregation lies ahead with web 2.0 and new search technologies folding in on virtual worlds.

The virtual shopping malls created in Second Life provide a view of future online retailing and the opportunity for advertising and cross-selling as part of a pure play uninterrupted and interactive customer experience. Semantic search and personalisation through profiling will strengthen this.

Advertising is fundamentally content and must follow the rules. This means relevant, attractive, interactive (at least non-invasive), regulated, ethical and innovative. Competition is fierce and advertising volume can be overwhelming.

Attention is getting harder to grab but desire to drive increasing growth in a booming multi-billion pound industry is unabated. Conversion rates and cost effectiveness are key drivers and advertisers need to match their pace of change with consumer confidence in relation to new methods and technologies.

The backlash against Beacon and public meetings over Phorm indicate that the consumer must not be rushed. The internet has an almost unique position in modern culture, for many a last bastion of escapism. We are profiled regularly in real world retailing, resistance to which has largely faded, but internet anonymity will not be easily surrendered.

Trust, data security and privacy must be addressed with users and not in spite of them. The key sell is advertising as content inline with user experience. Enriching and non-interruptive models coupled with semantic web and web 3.0 herald an exciting future for the industry and internet community.

Steve Nimmons CEng MBCS CITP is a senior technologist with Atos Origin.