Over the past few years, marketing arena worldwide has witnessed dramatic transformation. From integrated brand promotion to online socialization, from virtual consumption decision to celebrating womanhood–the ad-world panorama has been demonstrating a paradigm shift as the traditional formats of advertisements give way to interactive digital advertising over time.
Digitally displayed messages came in with several advantages viz. higher viewer recall retention capacity, consumer-targeting capabilities and sophisticated measurement techniques; turning the digital media into a powerhouse to reckon with in the advertising industry.
Flashback: 2008-2011
After the deep recession in 2008-2009, the world witnessed a recovering curve in 2010 and stabilization thereafter in 2011. The recession took its toll on the advertising industry and the traditional media formats withstood a hard blow as a result of crumbling consumer/business confidence, reduced advertising budgets and thrifty spending patterns across most industry verticals.
Following the economic trends, advertising growth slowed down gradually through 2011. Estimates show that core media revenues (excluding direct marketing categories) inched up 2.9% in 2011 to $147.4 billion.
Newspapers sales witnessed dramatic reduction in ad spends among the segments followed by weakening feat among all major formats of advertising, such as television, radio, outdoor, magazines. However, digital advertising formats survived the recessionary pressure cushioned by its heavy ROI benefits.
Year to Date: Worrying Quarters and Bending Growth Graphs
Despite the combined growth of 2010 and 2011, the US advertising market is currently showing deceleration with a dismal growth rate of 13%, below that of its 2007 levels of $168.7 billion.
The recent quarterly earnings snapshots of a few of the ‘Big Brothers’ of Internet and media companies may throw light on increased stagnation and the murky state of spending on advertising:
Google Inc.‘s (GOOG) fourth-quarter earnings report shows that the Internet search leader fetched less money per click on its online ads; dampening the investors’ assumption of a surge in online holiday shopping in the U.S.
Microsoft Corp. (MSFT) suffered losses of $458 million in the reported quarter, down 18% from a loss of $559 million a year earlier. Revenue grew 10% to $784 million due to reduced losses in its online services division, which includes the ad-supported Bing search engine.
Yahoo! Inc.‘s (YHOO) net revenue has declined year over year for the thirteenth straight quarter and reached $1.17 billion–$20 million below analyst projections.
Time Warner Cable Inc. (TWC) and Gannett Co. (GCI) witnessed 10% and 5% fall in advertising revenue to $242 million in the latest quarter, primarily driven by lower advertising amid the economic softness in the U.S. and the U.K. and weaker political advertising.
AOL Inc. (AOL), however, observed ad revenue growth of 10% in the latest quarter, its third straight quarter of year-over-year growth. A shift in focus to content and advertising from its dial-up Internet access service, worked magical for this web pioneer.
The stagnation in advertising market is expected to continue in 2012. Yet again, led by rising Political Advertising and Summer Olympic broadcasts (P&O), the quadrennial boost in revenue, will help generate a year over year growth rate of 3.7%. The figure appears quite reasonable, if not glamorous; even in the backdrop of a weak economic environment and high unemployment (8% as forecasted).
P&O Bonanza and the Big Mind Prophecy: 2012
MAGNAGLOBAL, the strategic global media unit of Interpublic Group Inc. (IPG), driving forecasts, insights and negotiation strategy across all media channels since last 40 years, recently released an updated US Media Owners Advertising Revenue Forecast.
The foretell says, excluding P&O revenues, core media advertising revenues would grow by 2.0% in 2012, to $149.8 billion. This estimated figure shows a retarded growth speed compared with 2011 rate of 4.5%.
The P&O bonanza, anticipated to add an extra 1.7 growth point, looks impressive enough to boost the advertising revenues to $152.9 billion, a 3.7% year over year growth over 2011. P&O effect percolation is likely to invigorate the broadcast television category, projected to grow by 8.5% in 2012. Outdoor media will step up by 4.0%, the estimates confirm.
Worthy of mention, the internet, withholds an alluring outlook. A slowdown in revenue growth in 2012, can in no way restrain the world-wide-web, it seems. Internet will still observe a double-digit growth of 10.9%, driven by paid search, online video streaming and mobile. Furthermore, along with improvement in budgetary allocations in the resurgent economy, the Internet marketplace is expected to witness an influx of dollars in social media marketing.
All other core media categories will struggle in 2012 due to weak underlying growth coupled with the rivalry of digital media. Newspapers (-6.0%), magazines (-5.2%), radio (-0.8%), starving for more advertising dollars, will all call for serious attention. Moreover, under the cut-throat competition of online and mobile alternatives, traditional, offline direct marketing will continue to decline in 2012.
The Never-Out-of-Tune Marketplace
The emergence of mass media, over the last couple of decades, shaped marketing into a predominantly mass targeting strategy. Hence, the focus of the advertising industry has gradually started shifting toward accommodating business models — a network to catch the attention of traditional as well as digital viewers within the web. Moreover, the one-to-one dynamics of interactive marketing has also increased the admen’s attempt to leverage the benefits of social networks, mobile as well as traditional offline channels.
Judge the digital potentialities and a strategic mix shift from traditional offline advertising to a dynamic online interactive marketing, Global Industry Analysts Inc. (GIA) recently released a comprehensive global outlook on the World Advertising Industry.
Driven by advancements in enabling technologies, increased penetration of Internet and increased emphasis on corporate marketing and brand promotion, the leading publisher of off-the-shelf market research, forecasted the media industry to reach US$691.6 billion by 2015. Region-wise, the emerging markets in the Asia-Pacific and Latin America are expected to contribute significantly toward total advertisement spends.
Over the next five years, PWC forecasts the aggregate global Entertainment and Media spending to reach $1.9 trillion in 2015, a 5.7% compound annual progress driven by economic growth. The consultant, however, masked the accelerating shift of spending from traditional to digital platforms.
The ‘Think Smart’ Era
The Ad-men are battle-planning for profitable growth, exploring strategies to retain their customers and deal with increasing dominance of novice online players. Business models in the media eco-system are changing as consumers are looking to use new devices to view and access content on the go. The service providers, on the other hand, are changing their pricing approach toward broadband access from tiered pricing to application-specific tariffs.
Thus, in the rapidly evolving world of advertising and media, the ability to identify and manage novice trends will separate the leaders from the laggards. And as the remark goes–“In 2012, companies will realize that digital is not a four-letter word.” (Phil Asmundson, vice chairman and U.S. Media & Telecommunications leader, Deloitte LLP), it seems that the ‘digits’ of the digitized media will rule as a dominant issue for years, going forward.
It’s the ad-game that the industry will never want to lose.
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