The size of the advertising market is difficult to assess, and estimates by analysts vary to some degree. This is partly due to the fact that the final cost of advertising for any company includes creative and agency costs; local branding and marketing efforts; 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 Internet 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.
Recently, spending for ads on social media sites has been added to the media spending mix, as this is a very rapidly growing medium. Another extremely 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.
The advertising industry has been enjoying strong revenues in recent years. Analysts at eMarketer estimate that the global market totaled $546 billion for 2014, and will grow to $578 billion in 2015. ZenithOptimedia forecasts ad spending growth of 4.9% for 2015 and 5.6% for 2016.
America is by far the world’s largest advertising and media market. ZenithOptimedia estimates that the 2014 total for advertising spending in the U.S. was $176.0 billion, and that it will grow to $197.5 billion in 2017. It places China second, with $45.4 billion in ad spending for 2014, growing to $62.0 billion in 2017.
The European market has been a big problem for the advertising industry, with only 2.9% average annual growth forecast for 2014-17. While the market there is massive, with a population over 500 million if you look at Europe in a broad sense, the economic picture has been generally dismal. Unemployment rates are high and consumer spending is low in such markets as Italy, France and Spain. Germany, the largest market by far, has been faring better than most.
Advertising spending has enjoyed outstanding growth during recent years in emerging markets. However, economic growth has been slowing in important markets such as China and Brazil. (India may be the most promising emerging market for 2015.) While growth may be slower over the near term, emerging economies are nonetheless 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.
Internet Research Tip: Top Countries by Ad Spending
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. eMarketer forecast $58.6 billion in U.S. online ad spending for 2015 (including online and mobile platforms), up from $37.3 billion for 2012. Online advertising spending in 2015, at $145 billion, will account, for 27% of all ad media spending worldwide.
Advertising on social media sites is gaining an ever-larger share of online advertising. eMarketer estimates the total social media ad market at $23.6 billion worldwide for 2015.
Advertising is irrevocably linked to media, whether traditional media like the 15,600 broadcast radio stations in America (about $17.5 billion in annual revenues); 1,941 commercial broadcast TV stations plus myriad cable and satellite TV outlets (totaling about $70.6 billion in advertising revenues); the 1,150 daily newspapers (about $16.7 billion in annual advertising revenues); or new media like the tens of thousands of Internet sites that now accept advertising. The advertising sector also includes direct mail, at about $21 billion yearly in the U.S.; magazines, at about $15.1 billion in revenues; and outdoor advertising, at about $7.1 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 generate billions more 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.
Issues and Options Related to Control and Pricing of Entertainment Content:
· Free, advertising-supported content versus content accessed only by paying subscribers
· “Sponsored” content paid for by one company, as opposed to traditional content supported by a variety of advertisers
· Illegal downloads of content versus authorized downloads that were purchased or subscribed to by the consumer
· Paid, one-time downloads of content for permanent use, versus one-time pay-per-view, versus continuing subscription required to view
· Portability (including the ability for a consumer to download once, and then use a file on multiple platforms and devices such as iPods)
· Delayed viewing or listening (such as Video-on-Demand, or viewing TV programming at the consumer’s convenience via recording devices such as TiVo)
Source: Plunkett Research, Ltd.
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 cellphone-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.
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 media center PC, or a Raku interacting between Wi-Fi and the TV) to the Internet means that interactive viewing will be brought to new levels. It also means that the download and local storage of content will be more convenient than ever.
This rapidly growing use of ads that are targeted to “passionate interest groups” is long past-due. By one count, Americans are subjected to 3,000 commercial messages daily—most of which, such as billboards, occur randomly. 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 MP3 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.
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 have to 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 in order to watch 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 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. 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.
Globally, more and more households are gaining access to the Internet, creating even more opportunities for online advertising, with an estimated 3.03 billion broadband Internet users worldwide, including fixed and wireless, as of the beginning of 2015. The global base of cellphone and wireless device subscriptions now tops 7 billion.
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 online and cable TV media, and are becoming thinner than ever. Newspapers are finding it increasingly difficult to compete against Internet news and advertising delivery rivals. In 2008 and 2009, during the recession, there were significant closings of major newspapers in the U.S., such as the Denver area’s Rocky Mountain News. The Seattle Post Intelligencer stopped making printed editions and went online only in March 2009, after slashing the size of its news staff. Other newspapers have reduced the size and frequency of printed publication. The Detroit Free Press put an end to daily home delivery. Classified ads are migrating quickly to web sites such as Craigslist.com.
Traditional radio broadcasting is suffering also, finding it increasingly difficult to gather listeners for advertising-based radio programming due to online music platforms such as Pandora and Spotify, as well as Apple’s iPods and 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 the hands of consumers.