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Why TV Ad Spend Will Grow More Than Digital Spend In Next Five Years/from Dave Morgan @ Online Spin

17 Jan

TV ad spend in the U.S. will grow more each year for the next five years than digital video ads will (yes, you read that correctly.)

At the closing panel of Gridley & Company’s 13th Annual Marketing, Internet, Financial Technology and Outsourcing Services Conference, — one of my favorite ad tech banking conferences, held Tuesday in New York — I predicted that television advertising spend in the U.S. would grow more in real dollars than spend on video ads on the Web, mobile and over-the-top combined, every year for the next five years. To make sure that the digitally biased audience knew that I was serious about my prediction, I said if I was wrong, I would pay for the conference cocktail party after any year in which I wasn’t right.

The crowd, a bit taken back by my bet, didn’t agree with me (nor did my fellow panelists). I’m quite confident I won’t be paying for those drinks at any time between now and 2019. Here’s why:

TV advertising and audiences are not shrinking. The average American watches more than 34 hours of TV programming every week. That number has gone up, not down, over the past 20 years, and has only begun to show signs of plateauing over the past two years. Time on the Internet and tablets and mobile devices has gone up, but TV usage hasn’t gone down. That’s why total TV ad spend has been growing between 4% to 8% per year — $3.5 billion to 4 billion — over the past five years, and is expected to grow similarly over the next five years. According to eMarketer, U.S. digital video ad spend has been growing fast, but only by $1 billion to $2 billion per year.

TV advertising works. Sight, sound and motion on 60-inch, high-definition screens deliver results every day for brands like McDonald’s, Coca-Cola, Walmart, State Farm, Kellogg’s and Ford. Audiences are massive. They are passive audiences. And they show up in unmatched numbers predictably every day. Those ads deliver results at the cash register. That’s why the TV industry spends $35 billion per year in new investments in content.

Demand outstrips supply. While lots of marketers and agencies have talked for years about rotating their ad spend out of TV, total TV ad spend has increased every year but one for the past 10 years. If some are pulling out, more are jumping in. Marketers in categories with a “moveable purchase,” like quick service restaurants, retail, automotive, insurance, movies, know that if they lose share of voice on TV to their competitors, they will lose sales and market share (and stock price and perhaps their jobs). The only other place that happens in the ad business today is search. That’s why the upfront works. Until that changes, TV ad spend will keep going up.

TV ads are getting better. TV has always been fully electronic, but only now is it fully digital. Today, TVs have computers for set-top boxes, many TVs are connected to the Internet, set-top-box viewing data is widely available for measurement and targeting, and lots of media folks who were trained in the online world are looking at TV and starting to apply Web-like ad approaches to TV.

TV and Internet Protocol video aren’t likely to converge until around 2020. As much as many of us believe we will eventually have a converged video world, where all video programming on TV is delivered over IP networks and is available on-demand with dynamic, addressable ads, that reality is still a long way away. One-third of America (100+ million people) does not have broadband in the home. Netflix on Saturday and Sunday nights in Manhattan buffers and slows down, and wouldn’t even rate as a top ten TV network. We still have a ways to go.

Digital video still coming of age. Video over the Internet and on mobile devices has an extraordinary future, but it still has a lot of growing to do. As compared to TV, it is still subscale. There is a limited amount of premium content ad avails, and TV companies control much of that. It has emerging fraud issues, not unlike its banner ad brethren. It’s just getting a more mature measurement framework in place with products like Nielsen’s OCR and ComScore’s vCE.

Lots will change in this market over the next 10 years, but probably not as much over the next five as many would like to believe. The law of large numbers and slow and steady growth is on my side on this bet. I feel very good about winning over the next five years. After that, I’m likely to take the other side of the bet. What do you think?

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