Will offline advertising be irrelevant in 10 years?

Posted by on Jan 15, 2013 in Advertising | 3 Comments






Online Advertising

What’s the big deal with online advertising?

You don’t need to be a big advertiser to see big returns

Online advertising gives even small budget advertisers the ability to grow a customer base with search, social, and display advertising. A single person with a computer and internet access can open ad accounts and build campaigns on AdWords, Bing Ads, Facebook, and LinkedIn today. On top of that, an advertising budget of $10 a day can place your ads right next to ads of the top ad spenders like Nike or Apple. In contrast, I have no idea how one goes about launching a television commercial or how to get it shown on the proper channel and in the proper time slot.

Online advertising is available to anyone and successful campaigns are within reach for any business and for any business goal. Combining well targeted ads on social networks and good keywords on search networks, advertisers can make sure their advertising dollars are spent on viewers likely to convert into customers.

Will other mediums remain relevant or will online ads take over completely? Where do you think advertising is headed?

Where are advertising dollars going?

Today, people spent far fewer hours with newspapers, magazines, radio, etc. The reality is that there are internet replacements for most of these legacy mediums. To give advertising growth some context - ZenithOptimedia estimates the total growth in worldwide advertising spend in 2013 across all mediums to be about $23 billion. Online advertising is expected to grow by $13 billion. That’s more than half of the total grow expected in advertising spend. TV is expected to grow by $9 billion, while all other advertising is expected to stay relatively flat.

Top advertising markets

Top ad markets according to ZenithOptimedia

The remaining hold out in offline advertising is television. There are internet supplements to television like Netflix and Hulu, but there aren’t full replacements. Exclusive programming and old fashioned habits keep the television market an attractive place for big advertisers. But think about how quickly that can change if the right content deals are put in place, and the hold outs committed to television switch over to online alternatives. The advertisers will always follow the customers, and the customers are moving online.

If you’re an advertiser today, online marketing offers the most opportunity and growth by far. Think about the advertisers that spend money on the commercials and product placement that people really see on tv. It’s rarely new companies with small teams. Successful television marketers are huge companies like Nike and Apple that have the relationships and budgets to give their ads prime placement.

Worldwide ad spending

eMarketer’s report on worldwide digital ad spending in 2012 showed that growth was about 18% over 2011. Total digital ad spending now adds up to more than $100 billion for the first time. In addition, they forecast that online advertising will account for 25% of total advertising spend across all mediums by 2016. Continued growth is indicative of the huge value advertisers are seeing from their online marketing efforts. In the US alone, a separate eMarketer report forecasted digital spending to top $37 billion in 2012, at a growth rate of nearly 17% over the previous year.

Worldwide digital ad spending

eMarketer’s report, on worldwide digital ad spending from 2010-2016

Of course, the internet itself is growing substantially. This certainly helps the growth of online advertising, however, advertisers still have to find enough value in online ads in comparison to other mediums like radio or newspaper. Even in the US where there has been a large market of internet users for quite some time, online advertising is still growing quickly. In the emerging markets – the biggest of which are Asia and Latin America – we’re going to see huge increases in internet usage and online advertising in the next 5 years. The growth in emerging markets, like Asia and Latin America, is a huge opportunity for advertisers.

What kind of online advertising?

Online Advertising breakdown

IAB’s ad category breakdown

In IAB’s half year report released in October on US online ad spending, they found that search advertising still accounted for half of the internet ad of revenues. Will social advertising take market share from search advertising? The growth of social advertising should play the biggest role in changing the distribution of spend, but it may not decrease search advertising’s current market share. It’s a possibility that it will influence the distribution of spend in the not so distant future. Over the past year, performance based advertising accounted for roughly two-thirds of ad spend and impression based advertising accounted for the majority of the remaining third. For the immediate future, I expect the distribution to stay fairly consistent with search advertising and social advertising experiencing growth side by side.

Please let us know what you think!

Clark Gates George

  • Jonathan

    I like the question about offline advertising disappearing. It’s a good way to think about how online ads are growing tremendously quickly at capturing eyeballs.

    I would argue that most non-digital placements (billboards, product placement, etc) won’t disappear, but the buying and selling platform will move to a RTB-style digital platform.

    • sahilio

      I don’t think those placements will disappear, though, I do think their effectiveness compared to online will decrease drastically.

      RTB for offline (print?) ads would be tough…though insanely cool. Those digital billboards are an implementation I could see working albiet incredibly distracting :)

      • Scotty

        Offline advertising is absolutely propped up by the agencies (see: special interests) that profit most from them. The world needs brave CEO’s and CMO’s that are more focused on returns than preserving relationships or seeking fame in AdAge and Brandweek…

        How many successful startups are launching with big TV campaigns or Print insertions: none. How many big businesses are increasing their digital ad spends by seeing plus-ups come from offline networks (ex. ESPN.com takeover as an add-on to an on-air sponsorship or TV campaign: lots.

        In this case, I hate both the players and the game.