$hift to Digital

100 Billion

A few weeks ago I read a data point that struck me as noteworthy for anyone interested in the growth of digital marketing and the trajectory of the advertising industry.

That data point, highlighted in a WSJ article, is that “Procter & Gamble Co. is now spending more than a third of its U.S. marketing budget on digital media…”

The article continued:

P&G chief executive A.G. Lafley said the consumer products giant’s digital spending on things like online ads and social media ranges from 25% to 35% of its marketing budget and is currently near the top of that range in the U.S., its biggest market.

This budget shift is of particular interest because it’s P&G, owner of the world’s largest ad budget and a company renowned for brand marketing.

Traditionally brand marketing has foremost meant television commercials, but the WSJ article also highlights a significant media-consumption milestone:  2013 is projected to be the first year that Americans spend more time with digital media than watching TV.

Which nicely segues to data included in an eMarketer article published yesterday:  eMarketer projects that in four years (2017) total U.S. digital advertising expenditure will be $61.4 billion, closing in on television’s projected $75.3 billion.

Within digital, the fastest growing format is video advertising. According to another eMarketer article from earlier this week, U.S. digital video advertising will increase by about 40% this year and next, and it’s growth is coming at the expense of television ads.

That article highlights research from the Interactive Advertising Bureau (IAB) that finds “much of that increased digital video spending will come out of former TV budgets. Seventy percent of buy-side US senior executives told the IAB they would likely move TV dollars to digital video in the coming year.”

Earlier this summer I wrote a blog post talking about the growth of online video. In that post I included an eMarketer projection estimating U.S. digital video ad spending will more than double from $4 billion in 2013 to $9 billion in 2017.

Putting this growth another way, eMarketer’s data indicates that video advertising will go from being approximately 6% of TV advertising in 2013 ($4.1b vs. $66.4b) to about 12% in 2017 ($9.2b vs. $75.3 billion).

A $9b market is relatively small but not insignificant. And as I explained in my earlier post, Google is especially well positioned to benefit from the shift in ad budgets.

More upside?

To add a personal prediction, I think there’s a good chance eMarketer’s forecast about upcoming video advertising growth is understated.

From my experience as a digital ad buyer, video ads have been surprisingly effective, not only for the brand-awareness building for which they were mainly purchased (targeted impressions were the primary goal) but also in terms of tracked view-thru conversions (i.e., online purchases made by people within 30 days of seeing the ad, meaning the video ad was likely at least one factor in the purchase decision).

As more digital marketers experiment with video advertising and as marketing departments overall continue to become more metrics focused, I believe there’s a strong likelihood that the shift to video advertising — and its increasingly sophisticated audience targeting — will rapidly increase.