Online to overtake TV ad spending in 2016: report

Online platforms will overtake television as the most popular source for Canadian advertising dollars in the next four years and the trend is not necessarily bad for traditional TV broadcasters, said Conference Board researcher Michael Burt, one of the authors of a new report. The report by the Conference Board of Canada, released Tuesday and commissioned by the Canadian Marketing Association (CMA), said the Canadian online advertising market will grow at an average rate of 11.7 per cent from now through 2016, when it will be worth $4.501 billion. “As a result, the Internet will become the largest destination for ad spending, garnering 26.1 per cent of the total in 2016 versus 18 per cent in 2011,” the report said, which compared ad spending on television, radio, online, newspapers, direct mail, magazine, out-of-home, mobile and telemarketing. Ad spending on television, which has been the most popular advertising platform since “the early 2000s,” will continue to grow at an average pace of 3.8 per cent per year, and will account for about $4.271 billion in ad spending in 2016, the report said. In a telephone interview, Burt, director of the industrial economic trends group at the Conference Board and one of the authors of the report, said the rise of Internet ad spending is “not necessarily” bad news for television broadcasters. He said the growth of the Internet advertising market will come at the expense of other platforms such as print newspapers and magazines and that it could offer additional revenue opportunities for broadcasters pushing more content online. “Internet overtaking TV is not necessarily Internet supplanting TV,” Burt said. “There’s still a lot of interest in broadcast. It’s not going away anytime soon.” Burt said broadcasters' share of the Canadian advertising market has grown at “about the pace of inflation” for the past 10 years and that the Conference Board study does not predict that growth to slow. Broadcasters could claim a bigger piece of the online advertising pie, he said, as they find ways to monetize their channels’ websites. “One of the things we note in the report is the blurring of lines between the media,” he said. “You look at things like radio and TV are increasingly being streamed online. Does that make it digital or does that make it TV?” he asked rhetorically. Another report last month by IAB Canada and digital video ad firm BrightRoll Inc. said Canadian advertisers are increasingly using digital and online brand videos for advertising projects and nearly half of them prefer to advertise on the online platforms of traditional broadcasters. The Conference Board report said ad spending “has yet to fully adjust” to the increasing amount of time Canadians spend online, and that print media is overrepresented in ad spending while Internet and mobile spending are underrepresented. Burt said Internet ad spending will rise mostly at the expense of traditional newspapers. “Where they’re generally capturing market share from is the print media,” he said. “Those are where you’re really seeing pretty large declines in market share in terms of ad spending right now.” The report cited data from comScore, Neilsen and Statistics Canada to project advertising revenues from 2011 through 2016. It said overall newspaper ad spending in Canada will decline by an average of 2.5 per cent per year from now through 2016 and will account for 10.1 per cent of the total advertising market in 2016. It said magazine ad spending will also continue to fall after losing 4.1 per cent in 2011. “The rise of the Internet has seen whole categories of advertising (such as classifieds) migrate from newspaper to the Internet, while at the same time circulation continues to erode as readers migrate to electronic media,” the report said. It said total Canadian ad spending will grow at an average pace of 3.7 per cent from now through 2016. Burt said the rising presence of online video services like that offered by Netflix Inc. will push broadcasters “to be more creative about how they generate revenues” in the years ahead. He said it will be increasingly important for broadcasters to secure agreements that allow them to push their channels' content online, adding that they could package their TV and online ad inventory into single advertising deals. “It’s really about how do you adapt your business model to the changing distribution system,” Burt said. “That’s part of the reason why we’ve seen a move towards the cable companies being the owners of the traditional broadcast channels.” Several Canadian broadcasters this year banded together to form an online advertising bidding service designed to drive advertising dollars to their online platforms. The service, called the Canadian Premium Audience Exchange, involves the online properties of CBC/Radio-Canada, Corus Entertainment Inc., Shaw Communications Inc., Rogers Communications Inc., and others. Sylvia Augaitis, a spokeswoman for the Television Bureau of Canada, said in an emailed comment that, according to its data, the growth of online advertising has helped increase Canada's ad “pie” from $10.7 billion in 2002 to $14.4 billion in 2011, during which television has maintained a “stable share” of that pie at 30 to 32 per cent. “Much of the growth in online over the next several years will be due to increasing use of video—Television is in the video business with premium content to be delivered to viewers on the screen of their choice (viewers will default to the best screen available at the time),” Augaitis said. “The growth of multi-screen consumption of Television content is good for the business of delivering premium video content (TVs, computers, tablets, smart phones).” The Conference Board report said it projected mobile advertising spending to grow at an average rate of 27.9 per cent through 2016 “but since it is starting from a small base, its share of ad expenditures will remain small, rising to only 1.6 per cent.” The value of mobile advertising spending in Canada will rise from $82 million in 2011 to $110 million in 2012 and up to $280 million in 2016, the report said. The report said different levels of maturity for various forms of Internet advertising is one reason why the market will continue to grow rapidly in the years ahead. Online display advertising is relatively “stable” while search and video advertising continue to grow, the report said. “This is a trend that is expected to continue as more television broadcasters make their content available online and services specialised in streaming video content, such as Netflix, grow in popularity,” the report said. Burt said another revenue stream for conventional broadcasters is the CRTC's value-for-signal regime, which would give TV stations the power to negotiate carriage terms with cable, satellite, and IPTV broadcast distributors. The Supreme Court of Canada is considering whether the CRTC has the jurisdiction to implement the value-for-signal regime it proposed in 2010. nkyonka@thewirereport.ca

Online to overtake TV ad spending in 2016: report

Broadcast | October 3, 2012

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Online to overtake TV ad spending in 2016: report

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