FTI Consulting Forecasts Digital Ad Spending Will Overtake Broadcast This Year
Annual Forecast Foresees Core Online Advertising Becoming Single Largest Ad Class in 2016, Despite Total Ad Market Contracting at Nearly $1.79 for Every $1.00 Rise in Digital Spending
According to its annual study, U.S. Media Industry Forecast, the firm's Media & Entertainment experts believe core online advertising will climb from
The estimated annual growth rate of 10.3 percent for digital ad spending forecast by the Media & Entertainment team stands in sharp contrast to a projected 4.2 percent average annual increase for the broadcast sector over the same five-year period. Broadcast ad revenues are expected to rise minimally in 2015 to
With core online double-digit gains by 2016, the firm's Media & Entertainment experts estimate that core online advertising will surpass both broadcast and direct mail (still a very significant part of the ad market) as the single largest advertising category, with direct mail remaining virtually flat at approximately
The Media & Entertainment team finds the quick pace of online advertising growth has taken a big bite out of the entire market over the past six years. It suggests that for every 1.0 percent point increase in digital market share, the entire market is contracting about 1.8 percent.
"While it is difficult to completely isolate one factor that is driving changes in ad spending from the historical trends, our model suggests that digital substitution is the primary driver contributing to changes in the television ad ecosystem today," commented
The Media & Entertainment team's model – driven by expected changes in macro-economic variables such as consumer spending, corporate investment, employment, digital advertising growth and political advertising – projects overall advertising growth from all forms of media (including TV, digital, print, direct marketing and outdoor) will increase this year by 2.4 percent in comparison to a 3.0 percent increase in 2014.
Media & Entertainment experts foresee a modest surge in spending in the political years of 2016 and 2018, with growth climbing 4.3 percent and 4.4 percent, respectively, but ad spending gains will be a paltry 1.8 percent in 2017. Combined, total ad spending should rise from about
Based on historical averages, the team's forecast suggests that the total ad market would currently equal
"If digital follows a growth curve similar to that of other technologies, we would expect it to grow from 22 percent of the market today to 30 percent by 2020 and 35 percent by 2040," said
Mr. Schaeffer added, "In fact, we are closely monitoring the possibility that digital's penetration of the advertising market may be accelerating. There are a few initial indicators that the hastening of digital video advertising may be causing such acceleration. If that does indeed prove out, we estimate the digit video ad trend could eliminate much of the forecasted growth in television advertising over the next five years."
*Excludes online advertising revenues captured by traditional media businesses, such as television broadcasters, newspapers and magazines.
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