Digital ad spending surpassed television in 2017

by | May 9, 2018

We’ve known this day was coming — the day when digital ad spending surpassed television and therefore all other advertising mediums. 2017 was that year. From 2010 on, we have seen rapid growth in digital advertising spending and that trend is expected to continue. According to MAGNA, digital advertising is expected to climb to more than $300 billion by 2022, nearly doubling the advertising spend for traditional television, which is expected to stagnant below $200 billion.

digital ad spending
Another interesting note in MAGNA’s report was that television advertising has also become more concentrated. There are fewer brands and products that are paying for television advertisements, on the whole, suggesting that digital advertising provides a better return for smaller companies.

The growth of digital advertising is nothing new, but the rapid growth of the industry does have some serious implications for digital agencies and advertisers. The industry is changing, and rapidly. As more brands turn away from print and television and begin to focus on digital ads, competition will increase and ad prices will climb.

There are a few steps that any digital advertiser should take to prepare for the growth within the industry over the course of the next 5 years to put themselves in the best position for long-term success:

Advertisers must embrace mobile and specifically mobile search

In 2016, mobile advertising accounted for roughly 51 percent of all digital advertising spending, according to AdAge. 47 percent of the mobile advertising market share came from mobile search. While saying that advertisers should “embrace mobile” has become cliche, the intent behind the recommendation remains as relevant as ever. Mobile continues to play an increasingly important role in the lives of the average person and the daily share of ads that consumers interact with are increasingly coming from mobile devices.

Advertisers should continue to innovate and flesh out their mobile advertising operations, finding new platforms and sub-channels to reach new audiences. As mobile advertising becomes increasingly competitive, it will be the advertisers with diversified mobile marketing programs that will be able to keep down costs and find new opportunities reliably.

Video and social media still driving forces behind digital growth

It’s also important for advertisers to keep a close eye on format performance as well. While mobile advertising is driving growth for digital advertising as a whole, digital video and social media are the formats responsible for this growth, according to a report from Dentsu Aegis Network.

format ad spending

While both formats saw their most impressive growth in 2016 when they surpassed a 40 percent growth rate, both formats are still outperforming others be a considerable margin with 20+ percent growth rates.

Digital video is becoming increasingly entrenched in the lives of the average person. Today, more than half of marketing professionals worldwide name video as the format that drives the best ROI for their company. Consumers engage with it. Social video generates 1200 percent more shares than text and image formats combined.

According to a report by eMarketer, growth rates in digital video advertising are expected to remain in the double-digital through at least 2021 and surpassing $22 billion at that time. By then, digital video could account for more than 17 percent of all digital ad spending.

Connected TV advertising presents an opportunity

The stagnation in television advertising can be directly attributed to cord cutting — the practice of canceling your cable subscription to opt for internet-based streaming services. All television networks are feeling the pinch as audiences are spread out among more channels and services. By the end of 2017, there were more than 22 million cord cutters in the United States.

Many of those that have shunned traditional cable have filled the gap with connected TVs. Connected TVs are platforms, typically delivered via set-top boxes or USB devices, that give televisions access to a range of apps and streaming services on their living room TV. Popular connected TV set-top boxes include Roku, Apple TV, and Amazon Fire TV.

Many of these devices offer advertising directly on the platform and throughout their menu systems. While Roku is the leader in streaming media player market share, a great deal of diversity has grown within the market.

streaming media player market share
Additionally, advertisers should consider advertising directly on the streaming apps that these devices offer. As more consumers continue to cut the cord and move away from traditional cable, streaming devices are only going to become more popular.

Much of this growth is expected to take place over the course of the next few years:

connected device growth
With 73 percent of connected devices getting connected in the coming years, it is the perfect time for advertisers to look toward connectable devices as a way to diversify their platforms.

Platform and channel diversification is key

As the digital advertising space becomes increasingly crowded, platform, channel, and format diversification will be key for all advertisers. While there are more advertisers in the space, the number of options available to advertisers continues to grow as well. Keeping a close eye on industry trends and using those to inform future strategies can help you to stay ahead of the pack and identify new opportunities more quickly than the competition.

For instance, one current trend that advertisers should be taking advantage of is in the U.S. native advertising market. According to eMarketer, U.S. native digital advertising was on pace to grow by more than 36 percent in 2017, making up more than 50 percent of all display ad spending in the United States. This growth was driven by a desire from publishers to offer a more mobile-friendly inventory to advertisers. A majority of native advertising came from social placements:

ad spending by segment
Identifying and testing the effectiveness of these channels early and often can play a key role in an advertiser’s ability to diversify their ad spend and weather increased advertising prices.

A crowded but varied future for digital ads

The future of digital advertising looks like it will become increasingly crowded as more advertisers vacant print and television for greener pastures. However, the diversity of platforms, formats, and channels will help advertisers keep costs down and diversify their strategies. Agencies and brands should keep a close eye on industry trends and adopt early to stay ahead of the competition.

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