MAGNA And Zenith: Digital Growth Fueled By Programmatic, Mobile And Video

Zenith MAGNA ad spendOverall ad spend will enjoy its strongest growth in six years – 5.4%, reaching $480 billion this year – largely driven by double-digit gains in digital media.

The fast-growing sector shows no sign of a slowdown: The interplay of programmatic, online video, social media and mobile will drive digital ad spend growth through 2018, according to ZenithOptimedia’s Global Ad Spend Forecast [PDF], released Monday.

The findings were echoed by Magna Global’s updated Global Advertising Revenue Forecast [PDF], issued on Thursday.

“Thanks to programmatic, a lot of mainstream, big branding sectors like auto, CPG and pharma see an opportunity to leverage their consumer or third-party data and use digital formats for their branding and direct-response campaigns,” said Vincent Letang, Magna’s head of forecasting. “It’s made digital more attractive, in a nutshell.”

Digital media will continue to be the fastest-growing sector in overall ad spend, reaching $170 billion globally this year, Magna said. For the US, Magna raised its digital growth forecast from December to 15% and $68 billion in spend by 2017. Globally, Zenith expects digital to grow at an average annual rate of 13% through 2018, when it will account for 29.9% of digital ad spend.

Programmatic display and video makes up three-quarters of digital ad spend, according to Magna. Programmatic grew from $14.2 billion in 2015 to $19.5 billion this year, and is expected to hit $36.8 billion in 2019. By 2019, 50% of online video will be bought programmatically.

Zenith estimates that programmatic accounted for 60% of display ad spend in late 2015. That will reach 67% in 2017, said Zenith’s head of forecasting, Jonathan Barnard.

“Programmatic spending is growing extremely quickly and very rapidly taking over the display ad market,” he said. “People will spend more [on programmatic] if that makes the advertising more effective.”

Explosive Mobile

Mobile continues to be the main propeller of digital growth, at desktop’s expense.

US mobile ad revenues will outgrow desktop by 2018, Magna predicted. Mobile advertising will account for 42% of digital ads by 2016, and half of all digital ad spend by 2017. Meanwhile, desktop revenues will remain flat.

Mobile grew 95% globally in 2015 and will continue to grow 34% annually through 2018, when it will reach $74.9 billion, Zenith said. Meanwhile, desktop will shrink 2% year over year, or by $7.1 billion, by 2018.

“We keep being surprised by the strength of mobile,” Letang said. “Mobile platforms are growing very rapidly in terms of consumer usage. We expect desktop-centric campaigns to be flat, and mobile will grow 42%. That’s very spectacular and happening very quickly.”

Surging Video

Online video is showing rapid growth, largely due to the decline of traditional display in mobile and the growth of social media. Magna’s updated report predicts 63% growth in the US this year, with a 12% decline in display.

Globally, Zenith sees online video and social media as key drivers of digital growth, at 20% and 24% year over year, respectively. Desktop will decline by 2% year over year. That’s a change from its March forecast, which predicted traditional display would grow at 6% year over year, Barnard said.

For the first time, Magna broke out social video, or autoplay video in social feeds, as a separate category. Social video on Facebook makes up 15% of total video spend, as well as 10% of social media spend, Letang said.

“We think social media ad revenue growth by 41% was driven by social video to a big degree,” he said.

Fading TV?

Both reports maintained previous predictions that digital ad spend will overtake TV by 2017.

“The two curves are crossing each other, with both digital media and TV getting approximately $68 billion in ad revenues at roughly 38% market share,” Letang said.

Despite digital’s catch-up, linear TV will see its largest growth period since 2012 this year. The channel increased 4.4% to reach $179 billion, which is impressive considering that Magna predicted in December that its growth would stall. But special events this year fueled that slight increase in spend, and TV is still showing signs of gradual decline.

TV ad spend grew 0.5% in 2015, 1.4% in 2016 and is expected to slow to 0.6% in 2017, Letang said.

“By and large over the long period, TV is flat,” he said. “The CPM inflation is approximately offsetting the decline in ratings.”

Zenith forecasts a similar pattern: 0.4% growth in 2015, by 1.4% this year and 0.3% next year, Barnard said.

“People are going elsewhere for their entertainment,” he said. “The actual number of viewers is declining.”

However, traditional advertisers still rely on linear TV to reach their core audiences – and despite inflated CPMs, they’re jumping on dwindling supply, Letang said.

“Over the last two years, we were interpreting the slow growth of TV as a sign that some budget that would otherwise go to TV campaigns would go to digital formats,” Letang said. “Now we see both TV and digital growing very robustly. For many categories, good, old-fashioned linear TV remains important, all the more so as audiences are getting scarce.”

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