Ad Revenue Growth Predicted To Rise 3.7% In 2017

Global ad growth will slow in 2017 to 3.7%, with total advertising revenues reaching $511 billion, according to Interpublic Group’s Magna.
By comparison, Magna estimates that 2016 ad revenue grew at a stronger 5.7% pace, reaching $493 billion. Magna states the slower rate of growth is attributable to lack of cyclical events such as the Olympics and major political campaigns that added $3.5 billion in incremental ad spend last year.

Advertisers are reallocating their budgets. Digital-based ad sales will grow double-digits to become the top media category in 2017, Magna asserted, surpassing linear TV ad sales for the first time ($70 billion vs. $67 billion for national and local).

2016 was the first year when digital ad sales finally surpassed total linear television.

This shift took place years ago in many other countries analyzed by Magna — such as 10 years ago in the UK and two years ago in China. The fact it happened in 2016 in the U.S. is a testimony to the strength and resilience of television in America: “linear TV is losing viewers but remains attractive enough to national advertisers that they are — so far — willing to tolerate high CPM inflation to try and maintain their investment in the medium,” says the report.

Digital-based ad sales are approaching 40% of total sales in 2017 and projected to reach 50% by 2021. Magna found social and search captured the bulk (95%) of digital dollar growth in 2016: $10.5 billion out of $11 billion total net growth.

Social video was one of the key drivers in 2016, and this will continue in 2017 with the main social media networks competing to offer ever more video content to their users, including some premium content through partnerships with television and major sports leagues.

This will allow social media vendors — Facebook, Snap, Twitter — to offer new innovative video ad formats to advertisers, such as ads in live social streams, like the Facebook Video app on OTT. Driven by this continued video push, Magna expects social video ad sales to double again in 2017 to reach more than $4 billion dollars, or a third of total U.S. digital video ad sales, and 20% of total social media ad sales.

“While total marketing budgets are flat, the main driver of advertising growth at the moment is below-the-line direct marketing budgets (e.g. direct mail) being re-allocated towards Search and Social by big and small businesses,” stated Vincent Létang, EVP global market intelligence, Magna. “Most of the net advertising dollar growth will be taken from traditional direct marketing budgets rather than new marketing spend.”

U.S. advertising sales grew by nearly 6.6% this year to $180 billion, which Magna asserted was the strongest growth in six years, and it’s a new all-time high for U.S. ad dollars.

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