Digital video’s fragmented audience and the difficulty that creates for brands will leave it trailing TV ad spending in pure dollars, but outpacing it in annual growth.
The U.S. market will see digital video ad revenues increase more than 40% this year, a gain of about $1.76 billion, to nearly $6 billion, eMarketer reported, with double digit growth continuing at least through 2018, when revenues in the segment will total about $12.71 billion.
eMarketer says TV advertising growth will slow to 3.3% this year, bringing its revenues to $68.5 billion, an add of $2.19 billion. The TV market is expected to experience similar growth through 2018, with its revenue hitting $79.64 billion.
“The digital video audience is spread more thinly than a mass television audience, and that segmentation makes digital video ad buys more complex and less reliable than TV advertising,” said David Hallerman, principal analyst at eMarketer. “Time spent with digital video is growing significantly, and it’s taking away some TV time, but given the diversity of placements and platforms, digital video viewers are more difficult for advertisers to target.”
Despite an increase of viewers and viewing time on digital devices, ad revenue growth also is being hindered by the business model used by segment leaders like Netflix and Amazon; both are subscription based rather than ad based.
The report also forecast that the growth of digital video advertising on mobile devices will outpace that of advertising on computers, eventually reaching relative parity in 2018. In 2014, eMarketer said, mobile will make up about $1.44 billion of the $5.96 billion market, about 24%. By 2018, mobile will control $6.07 billion of a $12.71 billion digital video ad market, about 48%.
Cisco, in its annual Visual Networking Index, earlier this week said video traffic in the U.S. is expected to make up 84% of all Internet traffic by 2018. Cisco said it expected tablet data traffic to expand by a CAGR of 74% compared to 64% for smartphones and 18% for TVs.
Ericsson, meanwhile, in a report this week, said it expected mobile video traffic to grow 13X between 2013 and 2019, put strain on already congested mobile networks.
Video already makes up 35% of smartphone traffic and more than half of all tablet traffic, Ericsson said.
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