The State of Advertising 2017
People have been consuming media and communicating on mobile for years, and 2016 was the year that ad dollars finally followed suit. Digital advertising revenues were up across the piece, and mobile was the engine of growth.
Media buying agency Zenith forecast that 75 percent of global internet use will be mobile in 2017, with 60 percent of global digital ad dollars pouring into mobile advertising by 2018. Mobile ad expenditure in 2018 will total $134 billion it predicted, “which is more than will be spent on newspaper, magazine, cinema, and outdoor advertising put together.”
This trend was clear in the U.S., where mobile advertising surpassed desktop search as the largest online ad format, making 47 percent of digital revenue in the first half of 2016, according to the IAB/Price Waterhouse Cooper (PwC) “Internet Advertising Revenue Report,” and equally apparent in the U.K., where budgets invested in mobile outstripped those on desktop PCs for the first time.
“It’s a significant moment, as mobile now overtakes desktop,” declared Tim Elkington, IAB chief strategy officer, reporting the figures in October. “Marketers devote more ad spend to mobile as they increasingly cotton on to the fact that people essentially carry an ad platform with them wherever they are.”
The study, commissioned by the IAB and conducted by PwC, showed the amount spent on mobile display ads (£802 million) overtook that of PC and tablet display (£762 million) for the first time during the first 6 months of 2016.
Total U.K. ad spend grew at its highest rate since 2010 in 2015, increasing by 7.5 percent to £20.1 billion, according to the “Advertising Association/Warc Expenditure Report,” vouched for by IAB U.K.
Internet ad spend increased 17.3 percent to £8.6 billion, with mobile accounting for 78 percent of that growth, increasing 61.1 percent for a total of £2.6 billion.
Paid-for search is still the dominant medium, totaling £2.49 billion, or 53 percent of digital spend, with mobile accounting for much of this growth, according to IAB U.K.
Smartphones and tablets now generate more than half of all online transactions, according to the data. On its current trajectory, mobile advertising could overtake spend on broadcast TV ads in 2017.
The study underlined that video, social, and native are the fastest-growing ad formats. Spend on video ads overall grew 67 percent to hit £474 million during the first half of 2016, with video now accounting for 30 percent of all display ad spend and 37 percent of all mobile display.
Ad spend on social media sites rose 43 percent to £745 million, and social media spend on mobile alone grew 64 percent. Mobile now accounts for 80 percent of spend allocated to social, according to the IAB/PwC study.
As social media consumption becomes increasingly animated on platforms such as Facebook and Snapchat, the majority of media professionals expect video to overtake static ads in media spend within the next 5 years.
Media buyers and sellers predict the growth in video ad spend is likely to come from new formats such as 360° video and VR according to the “UK Mobile & Video Advertising Truths” study published in September by Rubicon Project and conducted by Exchange Wire.
The latest Warc numbers also show that the internet now accounts for more than half of U.K. advertising excluding direct mail, making the U.K. the first major Western economy to reach this milestone.
All of this means the U.K. remains “comfortably the largest internet advertising market in Europe and third globally, behind the U.S. and China,” claims the Advertising Association. It forecast U.K. ad spend to post 4.2 percent growth in 2016 and 3.8 percent growth in 2017. While economic uncertainty surrounding the U.K.’s vote to leave the EU is a factor, internet spend forecasts were actually revised upward to 12.3 percent in 2016, with mobile advertising predicted to increase 39.3 percent in the same period.
“Investment in U.K. advertising remains strong this year, and the trend towards digital and mobile continues—but the medium term is more complex,” says Tim Lefroy, former chief executive at the Advertising Association.
Work Continues on Reassuring Brands
Viewability—especially of online video content—was one of the key stories in online advertising in 2016. This has been driven in large part by GroupM, which took the “100 percent viewable” requirement it announced in 2015 and put it into effect in many additional countries outside of the U.S. in 2016.
“While spend on video ads has risen, advertisers are still looking to understand if and how their video advertising efforts have positively shifted brand opinions,” says Videology EMEA managing director Jana Eisenstein (right). “In 2017, more agencies will be demanding a reliable, quantifiable way to show their clients how effective video is in driving results.
“As the programmatic market matures, substantial progress continues in real-time measurement, tracking, and ad-decisioning to improve brand safety, viewability, and combat nonhuman traffic,” she continues. “This must continue if the industry is to continue to operate effectively to scale and reassure its key clients, the advertisers.”
Brightcove has been at the forefront of a number of other solutions for viewability including a partnership with Moat analytics, HTML5 VPAID, and even viewability reported successfully with server-side ad insertion.
“With Flash VPAID (one of the primary ways that companies have tackled viewability to date) going away with the evolution of browsers, publishers and advertisers are now talking about viewability all of the time,” observes Mike Green (below left), vice president of marketing and business development, media for Brightcove.
Facebook’s admission that it greatly overstated how long users were viewing its videos has also made an impact, causing a renewed focus on video and advertising analytics.
Eisenstein calls this “indicative” of the need to create a universal metric and “universal measurement standards that everyone can trust.”
“There will be more use of multiple data sources in 2017 as more companies try to mesh fragmented data sources into a unified view across devices,” she says. “Those who are successful will be able to use sources such as TV measurement, broadcasters login data, operators subscriber data, advertisers customer data, and third parties with all sorts of behavioral, purchase, and geolocation-derived data to create a more powerful understanding of their target consumer.”
While acknowledging the essential place of Facebook and Google on media plans, Eisenstein contends that advertisers will increasingly argue that they are subject to “the same third-party measurement as legacy media brands to provide holistic and comparable campaign reporting.”
There is no question that as measurement improves on mobile devices, more premium broadcast/network content will be made available there, and it will be accompanied by the ad loads that that content warrants.
“Additionally, as screen sizes, mobile data caps, and Wi-Fi offload all continue to grow, so too will the volume of viewing, driving mobile video ad inventory up further,” says Green.
Ad products are evolving to bridge online and TV. Working groups like the NAB Ad Tech Committee are trying to pull together the players in the digital and broadcast sides of the premium video ecosystem.
“It’s not surprising that a broadcast ad trafficking company, SintecMedia, acquired leading digital trafficking company Operative to help streamline these disparate processes,” notes Green.
Programmatic Gains Ground
According to eMarketer, programmatic spending on TV ads will more than double to $2.16 billion (£1.48 billion) in 2017. The research firm also predicts that the amount will continue to increase to nearly $4.4 billion (£3 billion) by 2018 and account for 6 percent of total TV ad spending.
“The biggest hurdle to programmatic adoption is the unification and sharing of data to let buyers get scale,” says Green. “In this regard, at least in the U.S. there is very big scale available from network groups like NBCU and Turner, and the MVPDs like Comcast. Different pockets of the ecosystem are also finding a way to offer data-targeted inventory—like the broadcasters who are moving to ATSC 3.0.”
Videology’s 2016 UK Video Market At-A-Glance identified the continued convergence of TV and video buying with 9 out of 10 advertisers continuing to buy video ads in the same guaranteed manner as they do TV spots.
“The importance of guaranteed upfront buying and private marketplaces will continue,” predicts Eisenstein. “TV buying models will continue to be the basis of trade but will leverage the benefits of technology to manage an increasingly complex and fragmented buying portfolio.”
Videology believes we’re seeing a step change in the role of ad tech in TV. “We will see a dramatic rise in the deployment in ad-tech across all media channels, with a particularly speedy activation in TV,” says Eisenstein. “In the U.K., 2017 will be seminal in the development of programmatic TV as Sky, Virgin, and BT all line up progressive ad-products using first-party data and set-top-box technology. These platforms will open up full, addressable TV, with cross-device measurement that is as effective on the main TV screen as it is across its digital cousins.”
Ad Tech Consolidation
The M&A deals that took place in the ad tech space in 2016 are a continuation of a trend that’s been in train for many years.
“This year, we have seen fewer buyers, fewer ad tech startups with desirable scale, and larger exits,” says Green. “We’ve seen more M&A deals done with data in mind—rather than the nuts and bolts of ad infrastructure and delivery.”
Verizon’s $4.8 billion bid for Yahoo (which itself bought BrightRoll in 2014) to merge with its multibillion dollar acquisition of AOL is the major play. Others include IBM’s late-2015 purchase of the Weather Channel and Adobe’s acquisition of TubeMogul for $540 million in November.
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