As a result of higher internet
penetration, increased usage of smartphones and the proliferation of the
user-generated content digital advertising have started to play a key role in
the advertising market. The digitization of the customer decision journey has
further increased the competition in the industry since buyers are consulting
the digital channels more than ever now. Hence companies currently engage in a
broad spectrum of digital channels such as search engine advertising, banner
ads, email campaigns, social media and video games, to name a few, to get the
attention of their customers.
The digital market was sized at
$49.5b in 2014, as the total online revenue, and is projected to grow at a CAGR
of 11.3% to reach $103b, according to Forrester Research. The biggest driver of
this growth will be fueled by mobile ads. Mobile advertising revenue in the US
rose by 76% alone to $19Bn which comprised 25% of the overall digital
advertising market. Within the mobile advertising market the biggest revenue
drivers were Search and Display ads at 45% and 51%. Non-mobile advertising compromised
of search ads, display ads and the online videos as the biggest revenue drivers
at 37%, 16% and 7% for 2014 according to PWC. From revenue by pricing model
perspective, 66% of the market revenue came from the performance based ads
(where the purchaser only pays when there are measurable results) followed by
cost per thousand impression ads (where the purchaser pays each time an ad is
displayed).
With billions of online users the
advertising market is very much concentrated with the top 10 leading companies
bringing in the 70% of the revenues for 2014. Google (64%), Bing (20%), Yahoo
(12%) are the leading players in the search engine business whereas Facebook
(24%), Google (13%) and Twitter (5%) as the leading display ad businesses,
according to emarketer.
Even though Facebook continues to
be the leader in the display ad business and Google being the dominant force in
the search ad industry, Google is trying to undercut Facebook by increasing the
reach for users to its online video contents on YouTube, hence increasing its
viewership. The increased viewership is critical for Google’s ad revenue.
Google is also trying to explore other avenues as well through its Google glass
or through increasing its reach into the untapped regions of the world.
Facebook on the other hand is using
new ad formats such as in-stream ads (ads that displays commercials before,
during or after an internet video). With over 200mm active users within North
America Facebook is well positioned to be one of the leaded in display ad
market. Social networks are becoming the major source of prioritizing or
selecting videos and as a result the video viewership on Facebook surged to 4bn
from 1bn a year ago. Hence there will be a tough competition between the
Facebook online video viewership vs. the YouTube viewership.
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