Digital Advertising Spending to Catch Up With TV by 2019Kelly Gilblom
Global spending on digital advertising is forecast to increase 15 percent next year, buoyed by mobile and social media campaigns, and is projected to equal outlays for television by 2019.
Digital expenditures in 2015 will reach $163 billion, or 30 percent of total ad spending, according to Magna Global, a media research unit of Interpublic Group of Cos. In four years, digital will account for 38 percent of global ad outlays, a proportion as large as TV, which has held the biggest share of spending for more than a decade.
“It will happen sooner than we previously thought,” Vincent Letang, Magna Global’s executive director for global forecasting, said today at UBS AG’s media and communications conference in New York.
The forecast reflects consumers’ shift toward staring at their smartphone screens all day, rather than their televisions, according to Letang. In 2014, global mobile ad spending increased 72 percent, he said.
“This year, next year, if you do the math, almost all the growth is from mobile,” Letang said in a phone interview. “Especially in the home, for casual users and for entertainment purposes, tablets and smartphones are making great progress.”
TV ad spending is projected to rise 3 percent next year and 6 percent in 2016, New York-based Magna Global said. While TV has been the top medium for ad spending since 1999, when it replaced newspapers, smartphones and tablets have provided features that keep consumers hooked to the devices, Magna Global said. As a result, mobile ad spending has surged.
ZenithOptimedia, a London-based media research group, projects mobile ad spending will increase by an average of 38 percent each year from 2014 to 2017.
Challenging companies is the small screen space on smartphones. Ads can feel intrusive to users, according to a report from ZenithOptimedia. Additionally, mobile phones don’t accept cookies -- data that follow a web user’s browsing history -- making it difficult for companies to determine whether an ad led to a purchase.
That may change as digital wallets, in which people can make purchases using their smartphones, help companies track spending. Social media websites may also serve as a model to companies learning how to advertise on phones.
“Facebook and Twitter have rapidly restructured their operations for mobile consumption and advertising,” ZenithOptimedia researchers wrote. “Their ads are designed to blend seamlessly into the content feed -- they look native rather than intrusive.”
ZenithOptimedia said those two companies will account for one-third of mobile ad spending this year.
The spending increase on mobile ads is expected to slow, dropping from a 72 percent uptick in 2014 to 45 percent in 2015, and 36 percent the following year, Magna Global said. Letang said the slowdown is because the market is becoming more penetrated with smartphones and tablets, and as a result ad spending will level off.
“Growth plateaus, which is normal for an emerging format,” Letang said in an e-mail. “What really kick-started mobile advertising on a big scale was the introduction of mobile formats by Facebook in 2012, only two years ago.”
Total ad spending across all mediums is expected to increase by 4.8 percent to $536 billion globally in 2015, as economies continue to recover from the 2008 financial crisis, according to Magna Global.
Spending in Latin America should increase the most, with the region expected to see almost a 13 percent uptick next year after jumping 15 percent this year.
Inflation in Venezuela and Argentina is high, leading to an increase in nominal ad dollars spent. The region is also benefited from the 2014 World Cup, the international soccer tournament that drew the world’s attention to Brazil this year.