What’s the Latest Forecast on U.S. Ad Spending?

ad forecastingMost observers agree that 2015 will be a decent-or-better year for ad spending.  But how will it break down by media segment?

Industry and market forecasting firm Strategy Analytics has just released its latest U.S. advertising spend forecast, which it expects to total almost $190 billion.  That’s about a 3% increase over 2014.

But there are wide variations in the growth expectations depending on the media type.

Digital advertising leads the pack, with an expected growth increase in double digits, while at the other end of the scale, print advertising is forecast to drop by approximately 8%:

  • Digital advertising: 13.0% increase in 2015 U.S. ad spend
  • Outdoor advertising: +4.8%
  • Cinema advertising: +3.4%
  • Radio advertising: +1.8%
  • TV advertising: +1.7%
  • Print advertising: -7.9%

Of course, “digital advertising” is a broad category, and within it Strategy Analytics expects certain sub-categories to grow at a faster clip:  Social media advertising looks to be the star in 2015 (+31%), followed by video advertising (+29%) and mobile advertising (+20%).

Even with these lucrative growth expectations, search advertising (SEM) will continue to represent the lion’s share of digital ad revenues – around 45%.

Also, despite the dramatic growth of digital, the segment isn’t expected to break 30% of all U.S. advertising in 2015.  The more traditional TV ad segment continues to lead all others, although it has fallen below the 50% share of all advertising in recent years.

Here’s what Strategy Analytics is forecasting for ad expenditures by media segment for 2015:

  • TV advertising: ~$79 billion in 2015 U.S. ad spending
  • Digital advertising: ~$53 billion
  • Print advertising: ~$28 billion
  • Radio advertising: ~$18 billion
  • Outdoor advertising: ~$9 billion
  • Cinema advertising: ~$1 billion

Strategy AnalyticsLeika Kawasaki, a digital media analyst and one of the Strategy Analytics Advertising Forecast report’s co-authors, notes that  looking ahead to 2018, TV’s share of advertising revenue is expected to fall further to ~40%, while digital advertising’s share will reach ~35%.

However, it’s not that TV’s volume will be declining — it’s more that digital will be robbing more funds from other segments (particularly radio and print).

Additional details on the 2015 forecast can be viewed here — if you wish to shell out $7,000 for the report, that is.

Digital Advertising Growth Forecasts: Rosy Scenarios on Steroids?

Ad spend forecasts lower than projected.Isn’t it interesting how industry growth forecasts for emerging digital segments always start out looking stupendously stellar? Terms like “swelling demand” … “robust growth” … and “tipping point” often accompany these breathless predictions.

And of course, the business media are highly prone to report the news, as it underscores the fact that highly interesting things are afoot in the marketplace.

What’s done much less often is to go back at a later date and compare the growth forecasts to the actual performance.

But digital media company Digiday has done that, and if you think you remembered industry growth predictions that were a bit high on hyperbole … Digiday’s analysis reveals your memory is right on the money.

One market prognosticator – eMarketer – is often cited for its digital ad market predictions. But how accurate are they? Here’s how it forecast annual mobile ad spending in the United States:

 Prediction by eMarketer published in 2008: $5.2 billion in 2011
 Revised prediction from eMarketer restated in 2011: $1.2 billion
 Percent off-target: ~77%

And here’s how eMarketer forecast U.S. annual video ad spending:

 Prediction by eMarketer published in 2007: $4.3 billion in 2011
 Revised prediction from eMarketer restated in 2011: $2.2 billion
 Percent off target: ~49%

Granted, it is a challenge to forecast growth rates in digital advertising activity early on in the developmental cycle. But being off by such a dramatic degree makes the forecasts essentially worthless – and laughably so.

Another phenomenon may be at work as well. Invariably, the initial growth forecasts are too aggressive rather than too timid.

Why? Rosy forecasts tend to spark more interest from journalists, venture capitalists, publishers and others – and hence have a greater propensity to be published. So there may well be subtle pressure to “err on the plus side” when formulating the forecasts.

Digiday’s Jack Marshall poses that question, too, and then writes: “It’s important to think about where new markets and technologies are headed, but the ad industry often gets preoccupied and overexcited with what are essentially just guesses.”

As for the latest crop of (downwardly revised) growth estimates, Marshall adds: “Let’s reconvene in four years for the inevitable update.”

If you’re a betting person, you’d best wager on the revised figures being lower.