Ad spend move to Internet and mobile accelerates, but ad-blocking casts a shadow

By Jim O'Neill on Jun 10 2016 at 9:00 AM
Ad spend move to Internet and mobile accelerates, but ad-blocking casts a shadow

U.S. Internet ad revenues topped $15.9 billion in Q1 2016, a record, and more than a 20% increase over last year’s Q1 record-setting $13.2 billion. The increase is the sharpest Q1 spike in ad spending on the Internet in four years, according to a report from the Interactive Advertising Bureau’s (IAB) Internet Advertising Revenue Report conducted independently by PwC U.S.

“This year’s first quarter numbers speak to the vitality of the interactive marketplace and the power of digital to attract consumers,” said David Silverman, partner, PwC U.S.

In 2015, U.S. online ad revenues hit a landmark $59.6 billion, according to the IAB, marking six consecutive years of double-digital growth.

“These landmark revenues confirm the growing importance of interactive for brand marketers to reach consumers who are increasingly spending their time on digital screens,” said David Doty, EVP and CMO at IAB. “Last year the industry reached its highest level of investment at over $50 billion, and this first quarter lays the foundation for what could very well be the biggest year yet for digital ad spending.”

PwC’s Global Entertainment and Media Outlook report

PwC also this month released its annual Global Entertainment and Media Outlook report. The report predicts TV advertising would increase at a CAGR of 3.2% over the next five years to reach $81.7 billion in 2020. But, said the researcher, Internet advertising is expected to grow almost 3X as quickly, at a CAGR of 9.4%, surpassing TV ad revenues for the first time in 2017 and reaching $93.5 billion in 2020.

Mobile is seen as the true rising star, which PwC forecasts will make up nearly half (49.4%) of all Internet advertising revenue by 2020, up from just over a third (34.7%) in 2015.

PwC is even more star struck with mobile video ad revenues, which it expects to track at a 30.3% CAGR , reaching $13.3 billion in 2020, up from $3.5 billion in 2015.

"Our forecast reflects that dollars will begin to catch up to where the eyeballs are," said PwC principal Christopher Vollmer. "There's a lot more shifting of spend that can come out of areas that are maybe already allocated to digital, like money that's targeted more at desktop inventory today that can be shifted over to mobile. There's also money that can be shifted over from other budgets as well."

Ad blocking could hamstring growth

Ad blocking, however, could create major issues for brands.

PageFair estimates that as many as 200 million Internet users currently are using ad-blocking technology. Among mobile users, especially in the Asia-Pacific region and China, the number is more than 2X as high, around 415 million.

Moving forward, an increasing number of device manufacturers and mobile carriers are likely to increase ad blocking efforts on mobile devices, especially in emerging markets where mobile data charges remain high.

That means  broadcasters and publishers hoping to take full advantage of the advertising's shift to the Internet, will need to have countermeasures in place – like anti-ad blocking – to maximize their new revenue opportunities.

Stay tuned.

Follow me on Twitter @JimONeillMedia and on LinkedIn

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