The $600 billion advertising industry, which is growing at 5%
rate annually, is undergoing a rapid transition. While
TV ads continue to rule the roost with over 40% share, digital ads that include
online desktop and mobile ads have taken the center stage and are growing at a
rapid pace. According to eMarketer, Mobile advertising is the key driver of
growth around the world and advertisers will spend $64.25 billion worldwide on
mobile advertising in 2015, an increase of nearly 60% over 2014. So while social media platforms,
search engines, programmatic ad platforms and other Internet properties stand
to gain from this trend, the clear losers are the TV networks and print media
that rely on advertising.
Budget allocation for online ads is increasing at the expense of
TV and print media. While budget for TV ads is expected to shrink by 3% each
year till 2020, print ad revenue is on a steep decline. World-wide, print ads
declined 5.2% in 2014 from a year earlier and are down over 17.5% over the last
five years. This leads us to believe that print
ads will be relegated to the botoom tier and makeup only a small portion of the
ad industry in the future. However, a turf war between TV ads and Online ads
will continue in the near foreseeable future.
What Is Driving The
Fundamental Shift In Ad Dollars From Traditional To Online Media?
The Internet
advertising market is gaining traction owing to increasing ubiquity of
smartphones, tablets and PCs, coupled with an improvement in ad measurement
techniques. Internet penetration is changing user behavior and user-generated
content is facilitating a move away from traditional content generation sources
such as TV and print publications. More notably, the move online is
being driven by the emergence of programmatic platforms that enable
advertisers to generate higher ROI for their ad dollars by matching relevant
ads to websites with engaging content across geographies and time slots.
Consider the following:
·
Consumers Are Spending More Time On Connected Devices: – One of the primary reasons for the shift in adverting budget
from TV and print is the change in user and consumer behavior
facilitated by the advent of Internet enabled devices. According to research,
globally consumers spend more time each day engaging with mobile devices
(97 minutes) than on television (81 minutes), the desktop (70 minutes), radio
(44 minutes), and print media (33 minutes). While globally consumers spend 97
minutes per day on mobile, they spent 37 minutes with tablets, which together
account for 37 per cent of media time. [2] As
a result, advertising managers are now allocating more budget for online ads,
where engagement levels are higher.
·
Online Content Is Becoming Attractive, Thus Luring Viewers:- On the content supply side, user generated
video content is on the rise due to a number of factors including the
proliferation of low cost but high quality video equipment, the increase in
Internet penetration and bandwidth, and the low storage costs of online
content. Additionally, premium video content is also growing because many
traditional media companies are boosting their online presence to capture a
shift of viewers moving online for streaming digital content. On the demand
side, online video content is becoming increasingly popular due to broader
Internet access and the advent of smart connected devices (which include
tablets, smartphones and notebook PCs). Furthermore, newer video formats are
coming to fore that allow easy rollout of pre-roll and interstitial video ads.
As online video content empowers users to choose what, when and over which
medium to watch content, viewers are spending more time viewing videos online
rather than on traditional TV. We expect these trends will continue to drive
demand and supply for online video content in the future. The change in
consumer behavior is prompting the migration of TV ad budgets to online
spending. As a result, the video advertising industry has become fragmented,
primarily due to the growing popularity of online video streaming. Furthermore,
digital video ad spending is increasing at a faster pace and much of this
growth is coming from mobile devices. While TV ad spending was at $66
billion in the U.S. during 2014, mobile ad spending grew by 76% from $7.1
billion in 2013 to $12.5 billion during the year, according to Interactive
Advertising Bureau (IAB).
·
Placing Ads Online Is Cheaper:- Online video ads cost per impression (CPM)
still lags TV CPM. While a Turns study estimates that cost per impression
(eCPM) for online video is in the $8-$12 range, TVB
estimates this at $25 for TV. We expect TV
and digital video advertising spend to converge as multi-platform and
multi-screen video advertising get integrated.
·
Better ROI In Online Ads Due To Programmatic Platforms:- Over the past few years content providers
have been increasingly adopting ad-exchange mechanisms that use real-time
bidding (RTB) platforms. An RTB or programmatic platform is a method of selling
and buying online display ads in real time. RTB aggregates the impression slots
offered across multiple ad networks and matches them (based on the advertisers
target, budget and placement requirements) with the most appropriate ads.
Additionally, an RTB employs a dynamic pricing auction method which allows the publisher
to supply his impression to the highest bidder at any given instant. This
results in advantages such as better cost efficiency, higher performance and
greater granularity with targeting and measuring an ad’s effectiveness.
·
Rise of Social Media Is Fueling Rapid Shift:. Social media ad spending is expected to
outpace the overall Internet ad market, and grow at around 18% CAGR during
2014–2019. This
is further shifting ads dollars away from traditional advertising that
advocates consumption of content on an individual and personal level. Social
media websites such as Facebook have been able to increase their share in
online ads and average ad price for these websites has increased tenfold. In
Q2, average price per ad for Facebook strengthened by 220% annually.
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