$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.

4 thoughts on “$hift to Digital

  1. I agree with you Josh on the possibility of understated growth. We are quickly headed to a time when we will no longer refer to it as “digital marketing” it will simply be “marketing.”

    • I’ve seen that shift happening before my eyes in the marketing department in which I’ve been working over the past 10 years (Universal Studios Hollywood). At first digital was thought of in a secondary way and a good number of my colleagues were intimidated by digital. Now it’s integral to almost all campaigns and all my marketing colleagues have decent (if not solid or even strong) levels of interest and knowledge about digital. I’m sure this shift is typical of what’s occurred throughout the corporate world.

      Regarding digital video, I recall that you and Ryan at Net-Conversion were early supporters of online video campaigns, and advised your clients to initiate campaigns. It’s from a couple years ago now, but I remember your YouTube case study and see that it’s still live.

  2. Good overview on the growth of digital advertising. Marketers are going where the eyeball are but has anyone evaluated the return on investment of digital ads verses TV ads?

    • Thanks for the feedback! I’ve read various articles / research summaries about this, so it seems that many companies are, which makes sense given the desire to have data to support the move from “safe” (a.k.a., known) mediums to a new medium. Companies that have direct online sales channels can track “view thru conversions” to get a solid understanding of the video ads’ impact.

      Below are links two studies I recently read that provide support for online momentum (although one must note that both studies had companies involved that had a dog in the race — Brightroll and Google).

      But in addition to the ROI of videos ads vs. TV commercials, video ads have a big advantage in terms of campaign reach. As noted in the Oklahoma study, video ads enabled the OK Tourism to place ads in markets that are too expensive for their TV campaigns. It’s very easy to use online video to extend campaigns to specific DMAs even with low budgets.

      eMarketer: Ad Agencies See Effectiveness in Online Video

      Case Study on Google Think: How Travel Oklahoma Is Bucking Tradition to Win Visitors

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