In May, IAB and IAB Europe issued their annual reports on digital advertising for 2017 for the United States of America and Europe. Andrej Ivanec, Digital Planning Director of iPROM, points out the key findings of both report.
In the last decade, digital advertising has been characterised by innovation and growth. Despite the fact that consumers are using goods and services in a rational manner, investments in digital media advertising are growing exponentially.
The reports published by IAB and IAB Europe are important indicators of the state of the American and European digital advertising markets; for the twelfth year in a row, they, namely, reveal the portion of advertising budget investments directed towards digital channel advertising.
As you would expect in terms of economic growth, the investments in digital advertising have increased significantly. All markets covered by the survey recorded positive growth. Mobile advertising keeps on growing through mobile display advertising and advertising in search engines on mobile devices.
Another record year for digital advertising
In the past, IAB Europe already reported record investments in digital advertising, and 2017 was no exception – investments in digital advertising have seen another record year.
Last year, investments in digital advertising reached approximately EUR 48 billion on the European market and no less than USD 88 billion or EUR 75.6 million in the USA. In Europe, the advertising budget for digital advertising grew by 13.2 per cent, i.e. the most in the past six years.
The average European growth of investment in digital advertising, however, failed to catch up with the average US growth of said investment that increased by 21 per cent. Slovenia recorded 18.4% growth, i.e. somewhat above the European average (13.2%).
Slovenia ranked fifth among 27 European countries taking part in the survey. Great Britain, the largest European market, grew by 14.3 per cent in 2017, while our neighbours experienced the following levels of growth: 12.3% (Italy), 9.6% (Austria), 16.7% (Hungary) and 10.7% (Croatia).
European investments in display advertising are worth EUR 19.3 billion
In Europe, investments in advertising amount to EUR 117.2 billion (EUR 191.7 billion in the USA), if we look at the entire marketing budget.
Considering the size of the budget allocated to digital advertising, the charts in Europe are topped by Great Britain, Germany, France, Russia, Italy, Sweden, the Netherlands, Switzerland, Spain, and Belgium. Great Britain stands out with a digital budget 2.4 times the size of the German one trailing behind it in second place; actually, its digital budget is as high as the budgets of the German, French and Russian markets combined.
In Europe, the digital advertising budget is divided into the following four domains: video advertising, search engine advertising, directories (or advertising journals), and other forms of display advertising. 2017 displayed growth in all of these domains, while their proportions also changed.
Video advertising figures rose (from 9.2% to 11%) while advertising journals’ figures fell (from 15.1% to 14%), as did the figures of other forms of display advertising (from 30.4% to 29.3%).
In Europe, EUR 5.3 billion was allocated to video advertising, EUR 6.7 billion to advertising journals/directories, and EUR 14 billion to other forms of display advertising.
Mobile advertising is taking up approximately 40 per cent of investments in advertising
Another detailed division of the advertising budget in Europe for 2017 could have been prepared according to the following three pillars: mobile advertising (EUR 16.5 billion), social media advertising (EUR 8.1 billion) and video advertising (EUR 5.3 billion).
In the framework of display advertising, mobile advertising represents the highest of the three pillars, growing at an important pace in Europe in 2017 and reaching 41% growth. For comparison: display advertising on desktop computers only grew by 1.3%. Altogether, the digital advertising budget used on mobile devices already represents 40 per cent, if we consider the total amount of display advertising as well as search engine advertising.
The proportion of mobile advertising is more significant in the USA: amounting to no less than USD 49.9 billion, this segment represents 57 per cent of the entire budget allocated to digital advertising. In Europe, mobile advertising represents approximately 34.4 per cent.
Lease of advertising space on social media grew by 38.3 per cent
The second growth pillar in Europe is represented by payable advertising on social media.
In 2017, display advertising cost EUR 19.3 billion in Europe, representing 40% of the budget when it comes to leasing digital media. Display advertising can be further divided into two parts, namely payable advertising on social media and other forms of display advertising. In the past year, the share of payable advertising within the framework of social media rose to 41.8 per cent of all funds allocated for display advertising (from 34.8 per cent in 2016). In 2017, advertising on social media grew by 38.3 per cent.
If we consider the entire portion allocated by companies and organisations to lease of digital media in the USA, advertisers across the pond allocate 25 per cent of all media assets (i.e. 22.2 billion dollars) to paid advertising on social media, while said share rises to about 17 per cent in Europe.
As an interesting fact, let me add that Facebook alone generated EUR 34.8 billion of revenues in 2017, of which 98.5 per cent were generated through payable advertising.
Investments in video advertising are rising steadily
The third growth pillar in Europe is represented by video, reaching 34.8 per cent growth last year. For comparison: video grew at a pace about 4-times faster than other forms of display advertising without video, which only rose by 8.9 per cent in 2017. In accordance with the growth of video, the share of video advertising also increased: last year in Europe, said share represented 27.3 per cent of display advertising.
In Europe, video represented the largest share in Great Britain in 2017, rising up to 38.5 per cent; with 14.9 per cent dedicated to video out of the entire portion of display advertising, Slovenia is placed towards the end of the list.
The division between so-called instream and outstream video is also interesting when it comes to video. Instream videos are video ads appearing before, during and after the video content, e.g. on YouTube, while outstream videos are represented by video ads appearing independently of the video content, e.g. an iPROM Video Scroll Ad™ appearing in an article.
In 2016, a larger share (58 per cent) was represented by instream video ads; last year, though, outstream video ads prevailed, representing 54.1 per cent of all video ads.
In the USA, video represents 13.5 per cent or USD 11.9 billion, while said share is 11 per cent in Europe.
Digital advertising is significantly outweighing TV advertising
If we look back to some other characteristics of the IAB report for the USA for 2017, I’d also like to mention the comparison between the TV advertising budget and digital advertising. In the USA, the TV advertising budget shrunk by 3 per cent, amounting to USD 70.1 billion in 2017, while the digital advertising budget increased by 21 per cent, amounting to no less than USD 88 billion.
The first time this happened was in 2015 when the digital advertising budget exceeded the TV advertising budget: the former amounted to EUR 36.4 billion, while the latter amounted to EUR 33.3 billion.
Digitalisation is transforming the entire media ecosystem
Predicting digital advertising trends up to 2020 seems further away than it actually is. Perhaps because it represents the beginning of a new decade.
Having knowledge of the changes means, above all, an act of evolution and not revolution. I believe that advertising will keep on growing and will almost definitely represent the greatest impact via digital channels. Positive forecasts for digital advertising are also a consequence of an accelerated technological development in the advertising industry.
For the next two years, an average annual growth of 4.3 per cent in world advertising and an average annual growth of 10 per cent in digital advertising is forecast, while the share of digital media will represent approximately half of world advertising. Last year, digital advertising took the leading share of world advertising, thus becoming the largest advertising media in the world. By 2020, it is also planned that mobile advertising will increase to USD 180 billion, thus increasing the share to 50 per cent, while desktop advertising is predicted to nearly double, reaching USD 94 billion in total.
Changes in the field of search engines are also prospected, namely in the framework of voice search that is planned to reach 20 per cent of all searches in 2018. Native advertising will appear in new forms as new platforms develop.
In the future, advertisers will also be planning more TV and web video ads in a complementary role, thus enabling a better reach, as well as better targeting and adapting. Together, TV and web video advertising are becoming more important than ever. Their total share is expected to grow to 49 per cent by 2020.
The forecasts also point out that digital out-of-home advertising (DOOH) will have a significant impact on the growth of advertising in the years to come – a 15 per cent growth in sales was planned in 2018, amounting to USD 5 billion, which represents 18 per cent of the entire OOH consumption (with the exception of cinematography).
At the same time, the Internet of Things is becoming increasingly important in the digital advertising ecosystem: the experts believe that by 2020, 50 billion smart devices will be connected to it. Nowadays, there are nearly seven-times as many smart devices in the world as there are people.