US Advertising Share of Ad Dollars 705x529

Online Ad Dollars — Dominant Growth

  |   jim's digital lab

Advertising dollars in the media business have had some very good years, while some…well, let’s just put it out there…some have been down-right abysmal. After working in the broadcast, magazine publishing and digital media sectors at various times over the last several decades, I’ve come to appreciate and welcome even the smallest of economic markers pointing to a new burst of growth. When it comes to online advertising dollars, the growth curve is dramatic.

Television has remained the big dog over the last 25 years with annual up-front television commitments measured in the billions of dollars. The newspaper business has lost several of its largest and most profitable categories (national & local automotive advertising, classified ads and Jobs sections), with no magic formula for regaining those lost revenue generators. The big weekly news magazines, such as Time, Newsweek and U.S. News & World Report, are no longer “must-buy” on the media planning schedules. With hyper-local publishing activity and new, vertical categories emerging, the large circulation magazine monthlies have had to cut advertising rate bases, they’ve reduced trim size to save on paper and postage costs and they’ve significantly reduced single copy sales sell-in because over half the copies they put out on newsstands are returned unsold.

Disaggregated television models are now the norm. We now have hundreds of cable channels vs. the old “Big 3” networks. Time-shifting via TiVo and cable company-supplied DVRs has made it difficult to accurately measure television audiences for many popular shows. Place-shifting via Slingbox, HBO Go on an iPad, and a host of other options to take your shows with you means that time AND place now mean little when it comes to measuring the success of broadcast advertising dollars. And yet, it is interesting to see that all these disruptive influences on television have actually made broadcast advertising even more attractive for media planners and buyers. Why? Because they have an infinite menu of choices for placing television ad dollars: national and local combination buys; cable programming compatible with the type of product being sold (Fram oil filter advertising on the Speed Channel and Gatorade advertising on NFL Network); day-part selections no longer run from sign-on to sign-off simply because many stations run around the clock; ad cost negotiations no longer require a rate card. As a result, television has, by and large, survived nicely.

If the automotive industry killed the buggy whip manufacturers, then digital online media is on track to do much the same thing to traditional media forms, with perhaps only broadcast advertising able to hold its own. Online media advertising is not only growing…it is growing fast. The chart I’ve reproduced at the top of this post, courtesy of BI Intelligence, shows how the ad dollar marketshares have changed over a 5-year tracking period (2006-2011). But, the advertising pie is also getting larger, with the absolute size of advertising dollars by sector growing from about $62 billion to almost $75 billion since 2006.

In 2006, online media dollars had about 23% of all media dollars, while that share today is 38%. Television has remained flat in share, but has grown in absolute dollars. All other major measured media (outdoor, radio and print) have declined…none more precipitously than print. Here’s the simple math: online media advertising has DOUBLED over the last 5 years from $14.3 billion to $28.5 billion. If there’s one major contributor to this massive gain in advertising dollars, and the major beneficiary of it, it is Google Search advertising.

Over the next 5 years, there is nothing I see that can stop this large-scale shift of dollars to the online industry. Facebook, Twitter, LinkedIn, Pandora, YouTube and a host of other online destinations, content aggregators and services either have, or will have, some form of advertising baked into their business models. Everyone in the golf industry looking to sell equipment, apparel, wedding events or tee times will need to tackle the challenge of how to position themselves for success in this online digital world.

It is never easy to get comfortable with new-fangled advertising terms and entirely new media forms, especially if “column-inches” has been the way you measure the size of an ad, and if CPM is how you’ve measured its cost. Surf the web. Click on ad banners on your favorite websites. Look at your own website on your iPhone or Android phone…what does it look like? Download the Pandora app. Google your own company’s name and look at the paid ads that may appear at the top or on the right side of the search engine page. Look at the thumbnail ads on the right side of your Facebook page. Notice the paid-for promoted tweets on Twitter.

The online media world is making it easy to target and communicate with your potential customers. For those of us at Communication Links who dive into this every day, the thing that keeps us awake at night is not figuring out what’s happening TODAY, but trying to see around the corner to what lies just ahead. The pace of change is remarkable, and it’s only going to get faster in the next few years. Hang on…it’ll be fun and exhausting at the same time.