Traditional Ad Spending Unchanged Since 2000. Compelling New Data on Digital vs. Traditional Media Economy.

How important is it for traditional media companies to invest aggressively in digital media organizations and enterprises? Consider that ad spending in 12 non-digital advertising categories is the same in 2010 as it was a decade ago in 2000 ($162.5 billion before factoring in inflation), and will remain unchanged through 2012. Digital advertising (including search and social media) represented 12.0% of total 2009 ad spending and related marketing. In 2012, digital advertising is projected to represent 17.2% of ad spending. This data has been developed exclusively for subscribers to Jack MyersMedia Business Report. (See charts below and view full Myers forecasts and historical data here.)

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Twelve non-digital advertising categories (print, TV, radio, OOH, etc.) are projected to be flat in 2010 with 0.3% growth, to decline 2.9% in 2011, and to gain 2.9% in 2012. By comparison, six digital advertising and marketing categories will average 14.3% annual growth (+11.2% in 2010, +13.7% in 2011, and +21.0% in 2012).

Even during the advertising recession years of 2008 and 2009, digital advertising expenditures grew 10.1% and 5.6% respectively. During those same two years, non-digital advertising spending declined 7.2% and 16.9%.

The daunting economics of traditional advertising are stunning. The overall stability of the non-digital media sector can be read as somewhat good news and the growth of many traditional media companies will be spurred by their digital investments and expansion. But consider that the total $162.5 billion in 2012 non-digital ad spending is exactly the same as in 2000. Spending recovered to $210.3 billion in 2007 but the industry completely lost those gains in 2008 and 2009.

DIGITAL ADVERTISING OVERVIEW

Online search marketing represents 47.1% of total digital advertising and marketing. Although search is forecast to increase 6.7% annually between 2010 and 2012, it will decline in share to 38.4% in 2012 as marketers shift more funds into videogame ads (+26.3% annually), online video (+65.0%), mobile (+42.6%) and social media (+60.3%). Online display advertising is forecast to increase only 5.0% annually between 2010 and 2012, primarily due to unlimited supply and improved tools for online buying and selling.

ORGANIZATIONAL ISSUES AND OPPORTUNITIES

According to industry sources, the percentage of digital ad revenues at the typical traditional media company (such as TV networks, magazines, radio and newspapers) is well under 10%. The percentage of their investment in advertising sales organizational resources devoted to digital is less than five percent. Compared to digital-only media companies, traditional media companies are at a distinct competitive disadvantage.

Traditional media companies' greatest advantage is the consumer equity value of their content brands, but to date they have only marginally mined this value in the digital ad world. The challenge for traditional media companies is to identify how they can increase their investments in digital content, sales and marketing without jeopardizing their traditional strengths.

DIGITAL VS. TRADITIONAL ADVERTISING EXPENDITURES

Source: Jack Myers Media Business Report™
© copyright 2010 M.E.D.I.Advisory Group, LLC
Contents may be republished with source as Jack MyersMedia Business Report, May 2010.
2010-2012 are estimates. $'s are in billions.
M.E.D.I.Advisory Group LLC, Jack Myers, and employees accept no responsibility for any action(s) taken as a result of this forecast.
References: Barclays Capital, BIA/Kelsey, CAB, Carat, Credit Suisse, Deutsche Bank Equity Research, DMA, eMarketer, Goldman Sachs, GroupM, IAB, JPMorgan Chase, Kantar Research, Magna Global, Morgan Stanley, MPA, Needham Research, Nielsen, PQ Media Alternative Media Research Series, PriceWaterhouseCoopers, RAB, TvB, UBS, Veronis Suhler Stevenson Communications Industry Forecast, Wachovia, Wedbush, Zenith Optimedia.
This forecast excludes Olympics but includes NFL, NCAA and other sports programming. Includes Hispanic Media, although Jack Myers Media Business Report also issues separate data for Hispanic Media.