Both Publicis Groupe’s Zenith and IPG’s Magna attribute growth in online advertising to programmatic targeting and data in their global ad spend forecasts released this week. That momentum will help digital ad spend overtake TV this year for the first time.
Magna pegged overall ad spend at $187 billion this year, a 3.7% increase over 2016; digital spend will soar 14% to $80 billion in 2017. Ad spend will increase by 8.8% by 2018, Zenith said, about a third of which will be attributed to digital.
“What surprises me is digital continues to grow so much having reached that critical mass,” said Vincent Letang, EVP of global market intelligence at Magna.
Online display, including video, social media and traditional banners, will grow 15% to $122 billion by 2019, Zenith said. It points to programmatic’s advancements in personalized creative as a vehicle for growth.
“Over the last three to four years, the real ride is in display advertising: proper branding campaigns on the internet with real reach,” said Jonathan Barnard, head of forecasting at Zenith. “That is traditionally TV’s territory.”
Online video and social media, bought programmatically, were the largest contributors to ad spend growth overall. Programamtic is also driving social media, which has been “100% programmatic since inception by design and largely immune from the rise of ad blocking,” Magna said. Social media’s growth also coincides with mobile’s.
“The fastest growing channel is definitely social media, which is almost entirely in-feed advertising,” Letang said. “Nowadays, almost all of it is on mobile apps.”
Mobile ad spend grew 49% in 2016 to $81 billion and accounted for roughly 45% of overall internet ad spend, Zenith said. Mobile will grow on average by 26% per year through 2019, while desktop ad spend will shrink by an average of 4% per year.
While Zenith predicts paid search growth will lag “substantially” behind display at a rate of 9% per year, Magna said search will “remain the largest revenue generator,” growing by 13% to $39 billion in 2017.
“Desktop search is now stagnating because all the growth goes to mobile search,” Letang said.
Online Ad Spend To Surpass TV
But Magna and Zenith are both in agreement on TV: 2017 will be the first year in which more money will be spent on online advertising than linear TV.
Linear TV ad spend will reach $192 billion this year while internet spend hits $205 billion, Zenith said.
By 2019, TV’s share of ad spend will fall to 33%, its lowest since 1990. That is significantly lower than last year, when linear TV accounted for 44% of spend by virtue of it being the primary vehicle for brand advertising, despite high CPM inflation and dwindling viewership.
But TV’s share of brand advertising dollars will dip by 2019, thanks to the growth of online video and social media, Barnard said.
“TV’s recent loss of market share is due to money going to branding campaigns on social media and online video,” he said. “It’s not a simple competition with TV, because online video doesn’t have the same mass instant reach or impact, but it does have great targeting ability.”
The former will grow by 17% per year through 2019, Zenith said, while the latter grows by 20% per year. “Social video,” recognized as its own ad format by Magna, will double in 2017 to more than $4 billion and account for 20% of total social media spend.
“Social video was very compelling to consumer brands that were previously spending very little on social media,” Letang said. “It feels for some of them like the best of both worlds.”
2016 was the first year that major tentpole events like the Olympics saw linear ratings decline. The NFL also saw ratings drop this season for the second year in a row. Even marketers loyal to TV are concentrating spend across fewer brands and omitting TV from some product launches.
If TV CPM inflation continues as is, small and mid-sized brands might be priced out, Magna said.
As for advanced TV, addressable TV will benefit from consolidation in the cable and satellite space. Forty-two million homes were reached through household addressable campaigns in 2016, totaling $450 million in spend, Magna said.
As digital surpasses TV, Zenith leaves marketers with a note on brand safety:
“In this environment, it is vital that platforms and publishers address advertisers’ valid concerns about viewability and brand safety to secure sustainable growth. As the market matures, advertisers need to know for certain that their ads are being actively viewed by real people in appropriate environments.”
