Digital ad technology to drive 5‐6% annual adspend growth

The rapid development of digital advertising technology will help the global advertising market grow 5.3% in 2014, up from 3.9% in 2013, according to the latest ZenithOptomedia Advertising Expenditure Forecasts.

Growth will remain strong over the next two years, staying at 5.3% in 2015 and rising to 5.9% in 2016.

ZenithOptimedia’s new forecasts, released today, predict that global adspend will grow 5.3% to reach US$523 billion over the course of this year. Internet advertising is by far the fastest growing medium, which is forecast to expand by 17.1% this year, as improving digital advertising technology makes internet advertising cheaper and more effective.

The growth is being driven by a wider spectrum of companies than just traditional media, including digital specialists, tech companies, and direct advertisers, the report’s authors state.

The findings demonstrate how new technology is improving most areas of internet advertising. Improved advertising formats – such as the ‘Rising Stars’ identified by the Interactive Advertising Bureau in the US – are making internet display more interactive and attention-grabbing, with consumers more likely to view, remember and interact with them than older formats.

Meanwhile programmatic buying is evolving to allow more sophisticated and efficient targeting of display audiences, and is becoming better at delivering premium, brand building experiences.

ZenithOptimedia forecasts traditional display advertising to grow at an average of 15.8% a year between 2013 and 2016, up from 12.3% a year between 2010 and 2013.

Social media display is growing much faster – at an average of 29.9% a year between 2013 and 2016 – with advertisers exploiting the explosion of mobile social media use and the ability to target across desktop and mobile.

As online video extends to smartphones, tablets, gaming consoles and connected TV sets, it is providing advertisers with a wealth of new opportunities to connect with consumers, with Zenith forecasting online video advertising to grow by 24.2% a year between 2013 and 2016.

Paid search is being boosted by the adoption of tools that have proved themselves in display, making it more addressable, as platforms give advertisers more control over where, when and to whom their ads are exposed, and also allowing the retargeting of consumers who have previously visited an advertiser’s website with custom copy. Zenith expects these improvements to help paid search maintain an average growth rate of 14.0% a year over the next three years, up marginally from 13.5% over the previous three years.

The report’s authors also expect internet advertising to command 23.6% of global advertising budgets this year, exceeding the combined share of newspapers and magazines (22.7%) for the first time. By 2016 it is forecast the internet to account for 28.3% of global adspend, having narrowed the market share gap between itself and TV – the most dominant medium – from 15.9 percentage points to 9.9.

Mobile is the fastest-growing advertising segment

Mobile internet advertising – meaning all internet ads delivered to smartphones and tablets – is by far the fastest-growing advertising segment. The report states that the growth is being driven by the rapid adoption of mobile technology by consumers and the introduction of better advertising formats that allow advertisers to engage users creatively, without interrupting their browsing as much as early formats.

This year Zenith expect it to grow by 67% – seven times faster than desktop internet – and to account for 20% of all internet advertising. Zenith forecast its share of internet adspend to rise to 25% in 2015 and 30% in 2016 as mobile devices continue to proliferate and diversify.

Mobile advertising is by far the largest contributor to global adspend growth. Zenith expects mobile advertising to grow by US$35 billion between 2013 and 2016, accounting for 42% of all the extra adspend added to the market, followed in distant second and third place by TV (30%) and desktop internet (28%) respectively.

UK focus

Press

National newspaper spend fell 9.5% in the first quarter of 2014, slightly more than Zenith originally forecast. Zenith believe clients were holding back budgets until the period around the World Cup, and this is backed up by Nielsen data which suggests national newspapers suffered a decline of approximately 5% in the second quarter.

Sectors such as drink, travel and government were all up in Q2, but bigger sectors such as finance, telecoms, food and cosmetics are driving the overall decrease.

Consumer magazines are roughly on par with prediction (-7% versus -7.5% predicted), and this is in line with a gradual slowing of decline for this sector. Interestingly, the magazine Company has announced it is becoming a “digital only” brand, citing the recent success and growth of its website. This may not be the only occurrence of this nature in 2014, particularly among titles with a young target audience.

Newspaper and magazine publishers’ revenues from internet advertising (which are included in the internet total) are on the rise, but not by enough to make up for their print losses.

Cinema

2014 has been a strong year for cinema ad expenditure, and Zenith expects 2015 to be even stronger, thanks to high interest in releases such as Fifty Shades of Grey, the final Hunger Games, and the new Star Wars, Avengers and Bond films.

Digital

comScore has released its latest set of figures for June, providing an insight into the UK internet audience. The total number of internet users was stable, compared to May, at 48.4 million unique users.

In June 3.3 million users accessed the internet exclusively from mobile devices (smartphone or tablet), 8.8m exclusively from PCs, and 36.4m from multiple devices. Of particular interest, PC-users dropped from 38% of the total to 18%, mobile-only doubled (from 3.2% to 6.8%), but the biggest shift was in multi-platform consumption, which rose from 59% to 75%.

This was undoubtedly influenced by the World Cup taking place that month, however it continues the ongoing trend of rising multi-device consumption.

Digital advertising spend in the UK was worth £5.7 billion in 2013, an increase of 15.0% on 2012. Mobile continues to be a key driver of growth, worth £1.2 billion in 2013 and accounting for 21.7% of all digital spend, compared to 4.2%in 2011. comScore MobiLens data shows that in the three months average ending January 2014, 73% of mobile phone owners owned a smartphone, up from 66% a year earlier.

The market continues to shift towards programmatic buying. In 2013 the share of spend bought programmatically rose to 28%, though this proportion varied considerably by format. 37% of mobile was bought programmatically, compared to only 16% of video, though as the video market develops this proportion will no doubt increase.

Publishers will need to continue to embrace programmatic buying to protect their revenues, the author’s state, with an estimated 47% of digital spend to be bought programmatically in 2014, rising to the region of 60%-75% by 2017.

Radio

The radio ad market is looking very healthy, with half year ad revenue up by 8% year on year, driven by a very strong Q2. The key categories driving this growth are government (the Central Office of Information), retail (B&Q, Ikea and Homebase), business (British Gas), food (Asda, Morrison, Cooperative, Sainsbury, Aldi & Tesco) and telecoms (TalkTalk, BT & O2). Zenith expects this trend to continue in Q3 and Q4 and forecast 4.8% growth across the whole year.

According to the Radio Advertising Bureau, the top 100 advertisers have increased their share of ad budget spent on radio. It concluded that this increase was in response to the latest ROI Multiplier research, which shows that radio delivers on average return of £7.70 for every £1 spent on advertising.

Outdoor

Q2 performance was stronger than expected, with expenditure up 6% year on year. The remaining quarters are expected to be positive but lower, and Zenith expect full-year growth of 2.4%. Digital displays are still the main driver of growth and now represent approximately 25% of total spend.

TV

The upward revenue trend reported in Zenith’s previous commentaries is still evident. TV revenue increased by 8% over the first half of the year, driven in particular by January (+14%), February (+9%) and April (+18%). Zenith currently estimate Q3 revenues to be up 3%, with August exceeding all expectations at+9%. Zenith estimates growth of +3% in Q4.

This will bring the revenue growth for the full year to +6%. Motors remain a particularly strong particularly strong at +30% year-to-date, and retail is also very buoyant at +11%. The telecom sector is 15% down, however, because last year was strong, driven by the launch of 4G and the battle between Sky and BT. Looking forward to 2015, Zenith believe consumer sentiment will remain positive during this election year.

England will host the Rugby World Cup in September/October which will be shown exclusively on ITV. With this positive outlook Zenith expect TV revenue growth of 3% in 2015.

MediaTel subscribers can now access adspend and aggregated forecast figures by medium from AA/WARC, Carat, eMarketer, GroupM and ZenithOptimedia in Media Landscape.