Markets

The Current And Future Trends Of Digital Advertising

Advertising has always been a powerful tool to influence customer decision, preferences, and spending pattern by presenting a product story in an impactful way. With time and technology, the world is fast moving towards digitalized advertising, challenging older mediums while bringing in novel and innovative strategies. Here are the current and future growth trends of digital advertising and a look at the companies which are a part of this journey.

Trends & Future Growth

The worldwide total media spending on advertising* is expected to reach $542.55 billion in 2016, up from $513.07 billion in 2015, per eMarketer forecast. It is expected to grow at 5-6% over the next five years to get close to $700 billion by 2021.

  • Within advertising, digital advertising is fastest growing segment. The total internet advertising revenue is expected to surge at an 11.1% CAGR to reach $260.4 billion by 2020, per a PwC estimate; this however, isn’t the full potential of internet advertising which is limited by issues such as ad-blocking triggered by increase in loading time and data consumption.

  • A Juniper report gives slightly more optimistic numbers: it estimates global digital advertising spending across mobile, wearable and online devices to exceed $285 billion by 2020, despite the rising threat from ad-blockers. Overall, global Internet advertising revenue will surpass TV advertising in 2016, one year earlier than forecast.

  • The growth of digital advertising is largely driven by the enormous growth in mobile advertising. During 2015, mobile ad spending accounted for almost 50% of the internet advertising spending in the U.S. and the same is expected to grow at 38% to represent 63.4% of total digital ad spending this year as per a eMarketer report. Mobile videos are another segment which have witnessed aggressive growth. The rapid growth of mobile advertising is driven by higher mobile-broadband adoption, expansion of mobile telephony, increased time spent on mobile devices and more engagement for daily activities and content consumption. Overall, the figures indicate the dominance of mobile advertising (especially video) in the years to come vis-à-vis other forms of digital advertising.

  • Programmatic advertising continues as a preferred way of purchasing digital display advertising. While in 2014, just a little less than 50% of display advertising was purchased either programmatically or through an API. It is estimated that during 2016, approximately 67% of digital ad displays will be programmatically bought out of which mobile would represent 69%. The technique of programmatic advertising enables targeted advertising which wasn’t available under traditional segment based advertising models and is thus high on effectiveness.

  • To fully engage audiences and unleash the potential of programmatic ad spending, marketers are indulging in personalized, cross-channel marketing that covers all digital platforms (inbox, web) and devices (mobile, tablets, desktop, laptop). According to a report by Salesforce.com, “Advertisers are leveraging Facebook Custom Audience, Twitter Tailored Audiences, and now Google Customer Match to align advertising to the CRM-based data they already use to guide the customer journey.”

  • Although digital advertising is fast growing, it has its share of problems along the way. One of the crucial obstacles is the rise of ad blockers. As per Ooyala’s Global Video Index report for Q1 2016, more than 200 million Internet users currently use ad blockers. It says, “That number likely will continue to climb, especially as mobile networks — in the name of conserving customer data usage — move toward blocking ads and more device manufacturers, like Apple and Samsung, include ad-blocking technology on their phones.” A report by Juniper Research estimates a loss of over $27 billion by 2020 that digital publishers stand to lose over $27 billion to digital publishers by 2020, if a counter ad-blocking solution is not found. Acceptable Ad Initiatives (AAI) such as Google’s AMP (Accelerated Mobile Page) program are seen as mid-path solution for both publishers as well as users.

Companies

Digital advertising is emerging as a lucrative field for media brands, digital innovators, social networking platforms, search engines, and other platforms of ad selling companies. With a drift towards digital advertising, many companies are opting for online promotion of products and tools to engage potential customers; Kellogg’s is a known example of a great digital advertising strategy. According to Christian Brucculeri, CEO at Snaps, “Many brands that built their emotional relationship with consumers by telling stories fit for television and print formats are investing heavily building those connections with new consumers in the digital world.”

In terms of channelization of revenue, despite stiff competition, revenue remains concentrated with top online advertising players. According to a IAB/PwC report, the 10 leading ad-selling companies accounted for 75% of total revenues in Q4 2015 vis-à-vis 71% in Q4 2014. Companies that ranked 11th to 25th accounted for 9% of revenues during Q4 2015.

Some of the prominent players are Google (GOOG), Facebook (FB), Microsoft (MSFT), Yahoo (YHOO), AOL, Twitter (TWTR), IAC (IAC), Amazon (AMZN), Sohu.com (SOHU), LinkedIn (LNKD), Yelp (YELP), Baidu (BIDU) and Alibaba (BABA). While companies such as Facebook, Google are holding strong positions in the digital advertising, many are working on ways to strengthen their digital media business; one example would be Verizon (VZ) with its acquisition of AOL, Yahoo.

Final Word

Digital advertising, especially on mobile, is set to be the next big thing. This offers great opportunity to open new channels of revenue for ad selling companies as well as their backward linkages. However, concerns in the form of frustrated customers due to high volume of ads, use of ad-blockers will have to be circumvented or mitigated to attain the full potential of digital advertising. These challenges will surely bring out the best of creativity the advertising world has seen.

*Includes digital (desktop, laptop, mobile and other internet-connected devices), directories, magazines, newspapers, out-of-home, radio and TV.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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