Media, Entertainment and Sport

Digital now accounts for half of all US advertising

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The US public’s changing media consumption habits are affecting the advertising industry. Image: REUTERS/Darrin Zammit Lupi

Sean Fleming
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Spending on digital advertising in the US will overtake all other forms of ad spend this year, exceeding $100 billion in value.

This is one of the findings from the Magna Research US Advertising Forecast (Fall 2018), which highlights how the US public’s changing media consumption habits are affecting the advertising industry.

 Digital ad sales are soaring
Image: Magna Global

According to Magna, 2018 will be a record year for overall ad sales, which are expected to reach $207 billion for the full year. Growth will continue through to 2019, where a 4% increase is anticipated, slightly down on its 2018 forecast of 4.7%.

Mobile advertising is expected to grow to around $70 billion this year – up 30%. That puts it ahead of TV advertising and approximately double the amount spent on non-mobile digital (ie, desktop and laptop targeted activity). One of the reasons for that is the increased use of ad-blocking apps, which have fuelled a 3.9% drop in desktop advertising sales.

 Mobile ad spend is on the move
Image: Magna Global

Over-the-top viewing habits

Americans are watching more TV shows than ever. But their decades-long love-affair with their television sets is on the wane. According to Morgan Stanley, by late 2017 there were 120 million subscriptions to over-the-top (OTT) content services in the US from names like Netflix, Hulu, Sling, Fubo, and others.

 All change for ad spend
Image: Magna Global

Charging a monthly subscription and allowing viewers to watch their favourite show on a TV, PC, mobile or tablet, OTT services are big business and are attracting advertisers. OTT ad revenues are expected to reach just over $2 billion in 2018, up 40% on last year’s level, according to Magna. TV ad sales were static (not including the effect of events such as the FIFA World Cup), and print was down 17%.

The Winter Olympics and FIFA World Cup generated $630 million and $200 million in incremental TV ad revenues, respectively. But these are dwarfed by the anticipated effect of advertising around the US midterm elections – expected to push $2.9 billion in television ad spend this year, up 19% on 2014.

Searching for opportunities

When looking at search engine advertising revenues in the first half of 2018, Magna found they had grown by 18%. Social media ad sales jumped 38% and online video ad sales went up 27%.

 Social and mobile are leading the way
Image: Magna Global

Facebook’s share of all online video ad spending this year is expected to hit $6.81 billion (including Instagram). That’s a market share of 24.5% for the social media giant.

But when it comes to social video advertising, that 24.5% starts to look puny. An estimated 87% of all social video advertising dollars go to Facebook, eclipsing that of rival social platform Twitter.

Although Twitter will get 55% of its total US ad revenues from video, growing more than 12% to $633.3 million, that equates to just 8.1% of social video spending, and 2.3% of the total video spend.

Video is also a major focus for Snapchat, which is likely to see its US video ad revenues grow 19% to $397.3 million this year, giving it a 5.1% share of the market. By 2020, video is expected to make up 60% of Snapchat’s ad business.

 A market with two front-runners, but don’t discount Amazon
Image: Atlas

Google meanwhile, is estimated to have a share of 37.1% of the US digital ad spend market, making it the clear leader. Globally, advertising earned it $54.7 billion in the first half of 2018. By comparison, Amazon’s $4.2 billion for the same period looks tiny.

However, some reports indicate a substantial number of American consumers use Amazon as their de facto search engine of choice, rather than Google or others.

In 2016, a survey of 2,000 US consumers’ online shopping habits found 55% of them had gone straight to Amazon to search for items. By last year that had slipped back to 49% but it still represents a sizeable shift in online behaviour.

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