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Digital Will Overpower TV Ad Revenue By 2017: Suggests Report

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Digital advertisements did not produce as much money per viewer as its counterparts, but soon they’ll generate more revenue. Digital will become the biggest global advertisement segment by the year 2017. A new study has concluded that advertisers will continue to invest more money in digital advertising compared to television spots over the next few years.

What Do The Reports Suggest?

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Magna Global is a marketing consulting and investing firm whose study found out that digital advertising revenue will surpass traditional television advertising revenue globally by 2017. Furthermore, in the U.S. alone, the study projects digital advertising will completely overtake TV advertisement spending by 2016. At present, 38% of global ad spending is on television and about 32% is on digital platforms. According to the firm, total ad revenue in the U.S. grew by 2.1% in the year 2015 and reached $167 billion. This year, the industry’s revenue will more than double in growth at 5.2%, with digital advertising leading with $68 billion revenue compared to TV’s $66 billion. Magna Global believes that ad sales will grow 4.6% globally and earn $526 billion this year.

Another recent report from ZenithOptimedia corroborates findings of Magna Global. This firm believes that total advertising spend around the world will increase to 4.7%, generating approximately $579 billion, and that digital advertising will outdo TV ad spend by the year 2018.

Shift towards Digital Advertising

Digital media saw the largest rise in ad sales this year with a growth rate of 17.2%, while that of newspapers and magazines decreased by 8.6% and 10.1% respectively. Growth on other advertising platforms, including television, was more or less flat. Mobile phones currently constitute about a third of the total digital ad spending but it is expected to make up for nearly half of the total digital spend by 2017. Magna Global didn’t give a break-up of digital ad revenues for different companies, but it maintains that the usual leaders i.e., Facebook and Google will continue to dominate digital advertising.

What Drives Digital Advertising?

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According to the forecast, digital ad spending growth is being driven by social media and video. Search and display are growing relatively slowly as they’re more mature. Even so, paid search is still the dominant digital format in terms of revenue generation, representing around half (48%) of digital ad budgets. Ad sales improved by 15% last year; desktop growth was in single digit while mobile growth was estimated to be 55%. Desktop search ad revenues are declining in many of the developed markets. Though search budgets sometimes suffer due to increasing competition from social media platforms, the format continues to change and evolve. The shift to digital is like a mixed blessing for marketers. This is because digital media can be precisely targeted and gauged in ways that are more effective when as compared to TV but most digital formats are prone to ad blocking, visibility issues or fraud — though not search.

Dollars Are Now Flowing From TV to Digital

The prospect that ads on digital and mobile platforms would raise more dollars than TV became inevitable in the last several years. Hitherto, advertisers were too overwhelmed by their print budgets to cater to digital advertising. However, ad dollars are now being diverted from television to digital, according to ZenithOptimedia. This was witnessed for the first time in the last year. The news about the loss of revenue from TV to digital was doing the rounds for a long time, but the last year made it fairly visible. More specifically, ad dollars are now going faster into online video, mobile and social media. ZenithOptimedia expects mobile ads to account for 50.2% of Internet advertising in the year 2018, overtaking desktop advertisements for the first time. That shift in ad dollars to online and mobile has led to “digital deflation”: those advertisements are typically cheaper, and as ad dollars move to digital, there is pressure on media sellers to cut their ad prices. As a result, growth in the overall ad spending market has slowed down.

The Scenario in Asia-Pacific Region

Overall advertising revenue in the Asia-Pacific region will grow at 5.8% this year and at a compound annual growth rate of 5.5% for 2015-20, indicating moderate but stable growth across both emerging and mature markets in the region. China and India will continue to be the fastest growing ad markets in the region, expanding in excess of 8% and 10%, respectively, according to a report by advisory, consulting and research firm Media Partners Asia. The growth in revenue across all 14 markets has been finalized after discounts. The proportion of digital media in advertising market in the Asia-Pacific region is expected to exceed that of TV by 2017. Precisely, it will increase to 44.2% by 2020, increased from 30.7% last year.

The major contributors to this growth will be Australia, China, Japan, Korea and Taiwan. Even though TV will continue to be an important advertising medium, its share of regional advertising will decline, as ad spending in China and Australia will shift towards digital. Moreover, television will remain the biggest advertising medium in certain key markets such as India, Korea and Japan even in the year 2020.

India’s Outlook

Unlike most markets, India’s media industry continues to thrive because of the simultaneous surge of growth across various platforms, be it traditional media like radio having successfully completed its phase III auctions in the last year or the roll-out of 4G services which will further propel growth of new media/digital platforms, according to Media Partners Asia. Print and television still remain dominant in the Indian market. Vernacular newspaper advertising continues to drive growth in print media, while TV has the highest reach among audience. Convergence technologies will blur the definitions of digital and television in the near future but broadcasting will continue to thrive. Even in the most mature markets, television continues to thrive despite the growth of digital media.

Image Credits: bloomberg.com

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