Forecast: Slower overall revenue growth won't stop digital ad dominance

Dive Brief:

Interpublic Group's Magna predicts slower overall ad revenue growth this year (3.6%) compared to 2016 (5.7%), although digital ads are set to become the top media category, according to a report in MediaPost. The decline in total revenue growth was chalked up to no major events like last year's Olympic Games or the presidential political campaigns. Total ad sales should reach $511 billion, the group said.
Digital ad sales are expected to get close to 40% of the industry total in 2017 and are forecast to reach 50% by 2021. Digital will see more sales than TV for the first time ever, with a projected $70 billion compared to $67 billion combined for national and local television.
Breaking digital into categories, social video was seen as a key driver for revenue last year with the trend continuing into this year as social media platforms offer users more video content, including premium content via partnerships with media companies and sports leagues. Magna projects social video ad sales to double this year, accounting for one-third of digital video sales and 20% of total social media ad sales.

Dive Insight:

Despite some headwinds, marketers are still focused on expanding digital efforts, with Magna expecting double-digit growth with the channel compared to overall industry growth of less than 4%. Linear TV sales are expected to be flat, although consumer brands — particularly in the U.S. — will stick with TV campaigns despite an apparent inflation of CPM in the high single digits, according to MediaPost.

Magna sees marketing spend, not necessarily increasing, but budgets instead being reallocated toward digital mediums like online video. The move makes sense, following an industry trend that has seen major social players including Snapchat, Twitter and Facebook all make plays toward live streaming offerings and also longer-form, TV-like video content.

Google's YouTube is another central player in the explosive rise of online video marketing. Alphabet, Google's parent company, has recently pivoted more focus to the platform, and some analysts have suggested it is a sort of "heir apparent" to the tech giant's massive search advertising business. However, the channel has plenty of issues at the moment, as marketers are pulling their spend over concerns with offensive content. The long-term ramifications are still unclear of the relatively recent escalation in brands pulling their ads from YouTube.