Advertising & Branding Industry Market Research

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The size of the advertising market is difficult to assess, and estimates by analysts vary to some degree.  This is partly because the final cost of advertising for any organization includes creative and agency costs; local branding and marketing efforts; public relations; catalogs, brochures and other printed matter; the creation and maintenance of web sites, email campaigns and social media campaigns; and myriad other components, in addition to expenses for media.  Numbers that are available for analysis and comparison are generally limited to actual spending on media, such as radio, TV, billboards and paid search or online advertising.  Even these numbers are often educated guesses.  Estimates of ad spending may include spending at both local and national media outlets, as well as spending on internet media via paid search and online ads.

In recent years, ads on social media sites have been added to the media spending mix.  Another important development has been the use of data mining and predictive analytics to study patterns of consumer media use in order to place ads, especially digital ads, in front of the best possible audience for a particular ad.  For example, Facebook enables the advertiser to drill deep into consumer demographics, tastes, habits and locales in order to have ads appear to highly niched groups.  Google offers similar advertising tools based on consumer demographics and browsing habits.

Analysts at eMarketer estimate that the global advertising market totaled $584.1 billion for 2017.  ZenithOptimedia forecasts ad spending growth of 4.1% for 2018 and 4.2% for 2019.

America is by far the world’s largest advertising and media market.  eMarketer estimates that the 2017 total for advertising spending in the U.S. was $205.1 billion, and that it will grow to $259.2 billion in 2021.  ZenithOptimedia places China second, with ad spending growing to $89.9 billion by 2019. 

Emerging economies are seen as outstanding advertising markets for the long term, due to rapid improvements in household incomes, consumer spending and business investment, along with the continuing spread of media access via consumer electronics ranging from smartphones to flat-screen TVs.

Both the online audience and the level of sophistication in online advertising continue to increase dramatically.  Advertisers large and small have made the internet a very significant part of their advertising strategies.  PwC forecast $75.0 billion in U.S. online ad spending for 2017 (including mobile platforms).  Online advertising spending in 2016, at $145 billion, accounted, for 27% of all ad media spending worldwide.

Advertising is irrevocably linked to media, whether traditional media like the 19,100 broadcast radio stations in America (about $17.4 billion in annual revenues); 1,050 commercial broadcast TV stations plus myriad cable and satellite TV outlets (totaling about $74.5 billion in advertising revenues); or the 1,100 daily newspapers (about $12.0 billion in annual advertising revenues).  The advertising sector also includes direct mail, at about $10.1 billion yearly in the U.S.; magazines, at about $8.5 billion in revenues; and outdoor advertising, at about $9.2 billion.  In addition, there is significant activity in specialty and alternative advertising, everything from ballpoint pens printed with a message, to t-shirts, to small airplanes towing advertising banners.  Branding, marketing and public relations activities and services likewise generate billions of dollars in revenues.

Advertisers are faced with daunting new realities when considering the various media they might use to get their messages across.  Traditional media are losing control over their audiences.  That means that advertisers can no longer feel secure that their ads on TV, on the radio or in print are going to receive mindshare.  Gone are the days when television and radio programmers enjoyed captive audiences over a handful of networks, people who happily sat through ad after ad, or planned their schedules around favorite shows.  Consumers, especially consumers in younger demographics, now demand more and more control over what they watch, read and listen to, and thus more control over the advertising they might be exposed to.

Nonetheless, for advertisers willing to adapt to today’s rapidly evolving environment, there is good news.  Effective advertising today targets consumers based on things they are passionate about, rather than merely their tendency to watch network TV on Friday night, or their age or household income bracket.  That is, the increasing range of niche media now available enables carefully crafted messages to be designed for, and delivered to, specific consumer “passionate interest groups.” 

For example, consumers who read Bon Appétit magazine (gourmet food and lifestyle coverage), watch the Food Network on cable TV and hold Platinum American Express cards are likely to respond to messages that are centered on dining and entertaining well.  Obviously, a niche campaign could be created around direct mail or email to these upscale credit card holders, reinforced by print ads in the magazine (plus digital ads on the magazine’s web site) and cable TV ads on the Food Network.  This is a target marketer’s dream come true.  The product might be fine wines or Viking ranges, but it could just as easily be ads featuring Lexus luxury automobiles shown being used to bring home gourmet food ingredients, drive to a gourmet restaurant or arrive at the Aspen Food & Wine Festival.  The campaign might be topped off with special ads on social media, or an online contest on the Epicurious gourmet foods web site (www.epicurious.com ), and links to special offers, contests, how-to-cook streaming video demonstrations or useful news on the advertiser’s own web site.

Blogs, interactive magazines in the form of apps, social networks like Facebook, cable TV programming on-demand and smartphone-based entertainment are booming.  Never in history have there been so many unique opportunities for targeted marketing based on consumers’ tastes, interests, locations, special needs and passions.  In fact, asking consumers to respond by going to a specific web page makes advertising truly trackable and results-based—long the holy grail of marketers.

Cutting-edge cable TV technology makes television advertising directed at specific neighborhoods possible for the first time—a boon to advertising by local retailers, local services and political candidates.  Interactive television services are growing rapidly, leading to new opportunities for direct-selling via TV.  With interactive cable TV, subscribers can order movies on demand and other unique services.  They also have the ability to respond to direct sales offers via their cable systems.  For example, viewers watching a pay-per-view music concert may be able to order souvenirs such as t-shirts via interactive cable.  Cable TV offers another unique advantage to direct sellers and other advertisers.  Since the cable system knows the address of the cable subscriber, that address information can be matched against demographic databases to create a unique profile of the subscriber based on likely household income, value and size of the home and other data.  Ads displayed by the cable system can then be custom tailored to match the viewer’s profile.  Equally important is the tendency that cable viewers have to browse and engage in social media on their smartphones while they watch TV.

A true sea change in the way that television is watched and used is occurring as consumers purchase internet-enabled television sets.  A direct link from the screen to a set-top box or other controller (such as a Raku unit interacting between Wi-Fi and the TV) to the internet means that interactive viewing has been brought to new levels.  It also means that the download and local storage of viewing content will be more convenient than ever.

This rapidly growing use of ads that are targeted to “passionate interest groups” is long past-due.  A study by Yankelovich Partners found that two-thirds of Americans feel “constantly bombarded” by ads and nearly as many respondents felt that these ads have little or no relevance to them.

Today, electronic offerings such as DVDs, digital video recorders (DVRs), video-on-demand (VOD) and digital music players have vastly altered the way consumers enjoy entertainment.  People watch and listen according to their own desires and whims.  Miss the finale to a favorite television show?  Rent or buy it online, or record it to watch later.  Interested in only one track from a recording artist’s new CD?  Buy and download just the one song via the internet at iTunes.  Love a prime-time drama on a major network but hate commercials?  Record the show while ignoring the commercials with a DVR like Tivo.

The implications of these changes are staggering.  The business models upon which most media have traditionally run are becoming obsolete.  Revenue from advertisers is in jeopardy at traditional outlets, while advertising at new media, including online, is soaring.  Television programming schedules are losing relevance while electronic program guides are becoming more and more vital.  Media companies and the advertisers that rely on them are being forced to radically change, in order to deal with new technologies and new demands from consumers.  Network TV news, radio news and newspapers all find that they must compete fiercely against internet-based news content.

A large portion of sports programming migrated away from free broadcasts on TV onto paid cable channels and pay-per-view systems.  The latest change is the delivery of sports to subscribers who pay to watch sports on internet sites operated by major leagues.

Meanwhile, media platforms and ad delivery are evolving quickly.  Smartphones are now used for more and more entertainment purposes.  Game machines are going multipurpose with the ability to connect to the internet.  Broadband internet access to the home has grown to vast, mass-market numbers, while high-speed wireless connections are enhancing the use of entertainment and media on the go.  A serious evolution of access speeds and delivery methods will continue at a rapid-fire pace, and media companies will be forced to be more nimble than ever.  (One gigabyte download speeds are slowly becoming available in many major cities.)  As a result, more and more consumers are abandoning cable and satellite TV (along with their subscription fees) and shifting their watching to internet-based entertainment only, via platforms such as Hulu or the recently launched Sling.  This practice is referred to as cord-cutting.

In magazine publishing, some niche publications have been enjoying high advertising page counts.  Fashion magazines and bride’s magazines, for example, remain robust.  However, news magazines, business magazines and other broad interest publications are losing advertising clients to the internet, and are becoming thinner than ever.  Newspapers are finding it increasingly difficult to compete against internet news and advertising delivery rivals.  The most successful newspapers have very robust online platforms in addition to print.

Traditional radio broadcasting is suffering also, having trouble in attracting and keeping listeners for advertising-based radio programming, due to online music platforms such as Pandora and Spotify, as well as Apple’s iTunes music store. 

This revolution in media delivery and consumption will continue to upend traditional media outlets, creating new opportunities for some businesses, and bankruptcy for others, while delivering ever-increasing choice and control to consumers.