ZenithOptimedia report predicts online ad spend to overtake TV by 2016

  • Media
  • June 23, 2014
  • StopPress Team
ZenithOptimedia report predicts online ad spend to overtake TV by 2016

ZenithOptimedia (ZO) has released its June 2014 Global Ad Expenditure Forecast, and it predicts that over the next two years the online channel will overtake TV as the medium where advertisers spend the most money.

As things stood in 2013, television held a 29 percent share of ad spend, followed by newspapers with 23 percent and then by internet advertising with 22 percent.

The analysts at ZO predict that by 2016, ongoing ad spend trends will see online ad spend shift into first place as its share of overall spend jumps by seven percent.

ZO group business director Alex Lawson says that this isn’t necessarily a sign of impending doom for publishers or broadcasters, but adds that it does suggest a need for them to evolve their offerings.    

“Certainly we see spend going to both the news websites and TV stations through their own web and on-demand offerings,” he says. “But they need to adapt and offer the solutions that both consumer and advertisers demand – and that may mean changing their approaches, attitudes and business models to suit.”

Internationally, the report also observed that the internet is still the fastest growing channel by some distance. Online ad spend grew by 17 percent in 2013, and ZO predicts that this will continue between 2014 and 2016, with spend predicted to grow at an average of 16 percent.

ZO general manager Sophia Quilian says that these trends are also being reflected in the Kiwi market, which is expected to grow by 17 percent in 2014, but she notes there are some differentiators in the local context.

“Where globally display is the fastest-growing sub-category, with 21 percent annual growth, in New Zealand we are seeing that search has the highest growth rates,” she says. “We’re predicting an increase in search spends in New Zealand of 26 percent year-on-year compared to 13 percent for display and 5.4 percent for classified.”

Quilian says that technological advancements in the online channel will serve to further drive ad spend growth both locally and internationally.

“With upcoming improvements to the Facebook video offerings, more options than ever before with Video ad units, improved broadband speeds and connections, the proliferation of VOD networks and a seemingly insatiable appetite by many target audience groups for video content it’s hard to see anything except high revenue growth here. Globally we predict 24 percent growth per year for the next three years and we would expect this to be mirrored, if not exceeded, in New Zealand.”

Somewhat unsurprisingly, ZO predicts that fastest growing channel over the next few years will undoubtedly be mobile advertising, which is currently growing 5.5 times faster than desktop internet, globally.

IAB’s Q1 ad spend results recently revealed that New Zealand still lagged behind international markets when it came to mobile ad spend, and this was reiterated by ZO.

Mobile is now the main driver of global ad spend growth, and ZO forecasts mobile to contribute 38 percent of all the extra ad spend between 2013 and 2016.

“We’ve got a little way to go here before we mirror that impressive contribution, but it’s not far off and we would see mobile as becoming a significant part of display advertising growth considering Kiwis love of their Smartphones and mobile devices,” says Quilian.

“Globally we’re forecasting mobile advertising to grow by an average of 49 percent a year between 2013 and 2016; in New Zealand [we forecast] a 42 percent increase across mobile for 2014 and rises of 29 percent and then 60 percent for the following two years. By contrast desktop advertising is forecast to grow at less than 10 percent a year."

According to ZO's research, this growth in ad spend will see worldwide spend reach US$524 billion by the end of the year, up 5.4 percent from last year.

However, New Zealand's forecast is not quite as optimistic. ZO believes that the local market will only grow at the modest rate of 3.3 percent over the course of this year, eventually reaching US$2.23 billion. And this will continue over 2015 and 2016, as the Kiwi market continues to lag behind the international ad spend growth rate.

    

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