Advertising intelligence firm Magna Global recently released its latest forecast of US ad spending, providing new insight into the investment trends defining the industry. At the top of many advertisers’ minds is a question about TV and digital: Which format is earning more dollars?
According to Magna, 2016 spending on digital advertising is on pace to match TV advertising, with each format accounting for $68 billion, or 38%, of total media spending this year. This aligns with a forecast from eMarketer, which predicts digital and TV spending will also be more or less equal in 2016, each accounting for approximately 36% of total US ad spending. Beyond the numbers though, what other insights can we gather from these estimates about the state of the industry?
2016 ad spending has created a bigger pie for everyone
Magna’s forecast suggests that 2016 saw the largest increase in ad spending in the past six years, with total spending increasing to $179 billion, a 6.3% increase over the year prior. Two big factors for the increase this year are tentpole events such as the Summer Olympics and the US Presidential Election, both of which drew record spending from advertisers.
Digital is still the “next big thing”
Although US advertising spending on TV and digital were more or less tied in 2016, Magna and eMarketer predict digital investment will continue to climb to 50% of all ad spending by 2020. Unless overall ad spending continues to increase, TV spending is likely to remain flat or see a moderate decline.
Some advertisers are still waiting for digital to live up to its potential
Even as many observers predict digital will soon overtake TV, some of the world’s biggest advertisers continue to have doubts that may hold back its growth. An August 2016 report from the Wall Street Journal found that Procter and Gamble was pulling back some of its targeted spending from Facebook due to concerns their ads were not reaching the broadest possible audience. This comes on the heels of larger industry-wide concerns around digital challenges like ad fraud, measurability and scale. While these questions are likely to be solved over time, for now they remain a sticking point for many buyers.
As Magna Global’s new figures demonstrate, TV and digital ad spending have hit a key inflection point. Will digital ad spending continue to grow at the expense of TV? Will advertisers’ short-term concerns about digital continue to keep TV in the lead? Or will both formats continue to grow as advertisers realize the benefits of using both TV and video as complements to one another? Stay tuned, because this show is just getting started.