U.S. Digital Ad Revenues Will Surpass 'All Screen TV' Dollars By 2018

• by Steve McClellan, September 26, 2014, 1:31 PM
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Digital media net advertising revenues in the U.S. will surpass TV ad revenues by 2017, according to the latest forecast from Interpublic Group’s MAGNA Global.

According to MAGNA, the digital total includes all sources of online video, including online TV content from broadcasters and cable networks, which is excluded from the “television” category.

But even if the estimated $1.2 billion in online video ads generated by traditional linear TV networks (via full episode players, Hulu and the like) are lumped into the television category (for an “All Screen TV” total), digital would still surpass TV, according to the MAGNA numbers. But that would happen in 2018, not 2017.

In a “POV” piece written this week by top Magna forecaster Vincent Letang, he writes that digital will outgrow TV a year earlier in the U.S. than the firm initially thought -- “mostly because MAGNA downgraded the long-term television advertising projection based on poor performance of television this year in terms of viewing and ad sales.” The POV elaborates on some comments made by IPG CEO Michael Roth at a media conference in New York earlier this month.

Digital media sales, Letang notes, continue to grow at a double-digit pace on a percentage basis.

Net ad revenues for TV in the U.S. will grow this year from $67.5 billion to $70.5 billion in 2017, an annual growth rate of just 1.5%. Digital, in the meantime, will grow from $50 billion to $72 billion over the same period, with average annual growth of 12%.

Letang notes in his POV that digital media advertising is already bigger than TV in several countries including Germany, the UK, Netherlands, Denmark and China. “In those markets digital media usages and ad sales are above global average (27% in 2014) and television is significantly below the global average. This suggests that digital media still has plenty of room for growth and the share of TV will continue to plateau or slightly decline in the future.”

Several factors have helped accelerate the shift toward digital, according to Letang -- including the fast penetration of tablets and the rise of over-the-top video consumption. Also, the increased use of programmatic buying is making digital media inventory more cost-competitive to some categories of advertisers. Improved planning and analytic tools are enabling marketers to better measure the efficiency of digital campaigns on branding goals, Letang added.

That said, Letang also stresses that the shift to digital isn’t a death-knell for TV, which is benefitting from the decline of other media. “Digital media and most specifically online video, are taking ad dollar shares from television, while other traditional media categories (radio and print) are losing budgets to digital and television,” he writes. TV’s ability to take share from other media will help it remain “more or less flat in the next five years despite the erosion of TV viewing,” which Letang forecasts will average about 5% annually going forward.

Other factors should keep the TV medium in relatively good financial shape. It’s the main staple of political advertising for one thing. And certain genres continue to have strong viewer appeal like sports, reality shows and big-event specials.