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Strong Digital Ad Growth Projected through 2018

By | 09.01.14

Strong Digital Ad Growth Projected through 2018

According to a recent advertising forecast released by Magna Global, U.S. ad revenues are expected to increase by 3.5 percent in the next year, with a 4.9 percent normalized growth rate (excluding any impact of Political & Olympic [P&O] spending, which is the fastest rate of growth recorded since 2005). This is expected to drive core media advertising revenues to an entirely new peak at $172 billion. In addition, digital advertising sales are predicted to grow by 15.7 percent, with growth strongest in the social media (over 32 percent) and video (over 31 percent) sectors.

Despite these positive trends, this year’s ad revenue growth forecast has been downgraded to 5.1 percent (compared to a prior forecast of 6 percent in June 2014). Experts believe that this is due to a combination of current macro-economic conditions and lower incremental P&O spending estimates.

Interestingly, another June study released in PricewaterhouseCooper’s annual Entertainment and Media Outlook publication predicts that the rapid growth of mobile ad spending is such that it is set to overtake display advertising channels in the U.S. by 2016, becoming the second largest digital advertising channel in the U.S. According to the study, a 22.1 percent compound annual growth rate (CAGR) for mobile advertising is expected in the period spanning from 2013 to 2018, while Internet advertising as a whole only has a 9 percent CAGR forecast. Thus, it’s expected that mobile will account for 29.2 percent of online ad revenues by 2018, which means a projected spending of $19.2 billion on mobile advertising in 2018 (versus $7.1 billion last year).

Online video advertising is also projected to be a rapidly growing advertising channel, predicted to grow at a compound annual rate of 19.5 percent between 2013 and 2018 due to a huge increase in audiences. However, since video ad revenues grow from a smaller base, in 2018 they will constitute a relatively smaller share of the entire digital market (with only a 10 percent share projected).

Paid search advertising is expected to continue to lead the online advertising market through the end of the forecast period in 2018. However, its overall share is expected to drop (from 43 percent to 37 percent of all digital advertising dollars), as more search dollars move to mobile forums.

References

MarketingCharts Staff. “U.S. Ad Spending Forecast to Reach New Peak Next Year.” Marketing Charts. 8/28/14.

MarketingCharts Staff. “U.S. Ad Spend Growth Forecast in 2014, by Medium.” 6/17/14.

MarketingCharts Staff. “U.S. Mobile Ad Spending Forecast to Exceed Display in 2016.” 6/11/14.

PricewaterhouseCooper. “Global Entertainment and Media Outlook 2014–2018.” 6/14.

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