Global Digital Ad Spend Picks Up Pace
Digital ad spending has surpassed TV in the UK and newspapers in Japan. With its growth trajectory, it is poised to be the leading source of advertising worldwide within a couple of years.
Important Details: The first quarter numbers are in for the US news industry. Overall advertising was down 9.7%, with online advertising showing growth of 4.9%. Those numbers show that the bleeding of revenues experienced by newspaper companies is slowing. However, it is worth remembering that the first quarter of 2009 — the comparables against which the 9.7% decline is measured — was the depth of the Great Recession, as panic gripped everyone. The optimism is tempered, a sense of possible returning stability, even though this quarter’s measure is being compared to one of the worst quarters in US history.
The facts, looking globally, point to digital advertising becoming the number one category of ad spend, across the Western world, in the next several years.
Last year in the UK, which experienced brutal recession, digital ad spend surpassed TV ad spend — and grew by 4.2% year over year. Europe as a whole, in just-released numbers, grew 4.5%. Last year in Japan, also gripped by the economic turndown, digital ad spend has surpassed newspapers — and grew 1.2% year over year. In addition, the first-quarter data on digital advertising shows it is coming roaring back, with positive comparables to a year ago, compared to newspapers’ negative ones. In the US, digital advertising grew at 7.5% for the first quarter.
In the US, digital ad spend remains third ($22.7 billion in 2009), behind TV ($26.2 billion in 2009) and newspapers ($24.6 billion in 2009). Given the still-negative trajectory of newspapers and TV recovering, but more slowly than digital, it’s not hard to see digital becoming number one soon.
Implications: Remember how Eric Schmidt proclaimed the end of the recession night last August, and said Google would start buying companies rapidly, which it’s now done at the astounding rate of one a month? Google, the prime barometer of the velocity of digital advertising, calculated that the recession was just a hiccup for it and the digital ad industry. For the newspaper industry — which gets no more than 15% of ad revenue from digital sources — the recession was a big complication; the patient was already sick, and what was a hiccup for Google was chronic indigestion for newspapers.
Put together those two trajectories — trying to get to positive growth for newspaper companies, while still trimming expenses compared to double-digit positive growth for the biggest beneficiaries of digital advertising, which are hiring (Google alone, 800 in the first quarter) and buying companies (Apple is on a buy-a-company-a-month spree as well), preparing themselves for more growth.
Here’s another number that’s important, in this big scheme of things, in the where-the-world is going vs. where it’s been reckoning: Of digital advertising — not only soon to be #1, but also the fastest-growing kind of advertising — newspaper companies get maybe 10 or 12% of the total digital ad spend. That’s compared to a 20% share of the total ad spend that they consistently got in the pre-digital world. So while they do partake in this fastest-growing ad category, and companies like McClatchy and Hearst, among others, are more rapidly pushing online-only sales, they’re collectively taking in dimes of the digital dollars, while the big aggregators are getting the biggest shares.
One last wrinkle here. It’s still so early in the digital ad game. Yes, digital ads are poised to become #1, but we’re seeing a further acceleration of spending here. Think what’s developed just since the first year of the year: Google gets AdMob approval from the FTC, Twitter gets moving with Promoted Tweets, Facebook multiplies in commercial presence, and Apple gets into the ad business big-time with iAds. Lastly, the iPad — with its fast adoption curve — is turning the heads of top digital ad agencies, eager to test the brand-immersive capabilities of the platform.
It’s early in the digital ad game, but as digital advertising is poised to become the leading ad category, that ascendancy poses even more questions for news companies trying to find dollars, pounds, euros and yen — and stability.