06/04/2014

As growth goes digital, advertising leads the way

MarcelFenez0609JPGAuthor: Marcel Fenez, Global Entertainment and Media Leader, PwC

In my everyday conversations with entertainment & media CEOs across the world, I often hear that the consumer is leading the charge to all things digital. To an extent that’s undoubtedly true: if consumers weren’t migrating with such speed and enthusiasm to digital behaviours, devices and services, then companies wouldn’t invest in them.  Yet surprisingly, as our Global Entertainment & Media Outlook 2014-2018 confirms, growing digital revenues in the consumer segment over the next five years will be a tougher challenge than in the other two key segments of advertising and internet access.

In my new video blog, I talk through some of the key themes from this year’s Outlook. And in terms of advertising’s leading position in the migration to digital revenues, our growth projections speak for themselves: Outlook - Figure 2

  • Digital revenue from advertising has already surged from 14% of total global advertising revenue in 2009 to 25% in 2013, and will hit 33% by 2018, supported by mobile Internet penetration reaching 55% in that year.
  • Digital revenue from consumers – excluding Internet access spending – accounted for just 10% of consumer entertainment & media revenue in 2013, and will edge up to 17% in 2018.
  • The fastest growth in spending will be in the third segment – Internet access – which will see its share of total global entertainment & media spending grow from 25% to 30% over the five years.


Differing dynamics
So, why the disparities? It’s not that consumers are holding back from spending on digital content and services. Rather, the growth differential springs from the contrasting dynamics in each sector. As advertisers’ digital options and channels expand and proliferate, they’re migrating their budgets toward digital at breathtaking speed: by 2018, global Internet advertising will be poised to overtake television as the largest advertising segment. In contrast, shifting consumer revenues to digital, by rolling out new services and getting people to buy them, is a much longer haul.

Meanwhile, revenues for Internet access will continue to benefit from its position as a ‘gatekeeper’ to the digital services consumers want. In light of this role, the growth of ‘24/7 access’ and micro-transactions suggest that the key to monetising the digital consumer is to adopt flexible business models that offer more choice and better experiences. Electronic home video over-the-top streaming and digital music streaming will be two of the fastest-growing consumer sub-segments over the next five years.

Opportunities across industries…
In our increasingly digitised society, I believe these growth trends – and the changing consumer behaviours that are driving them – have implications that go far beyond entertainment & media. To illustrate why, here are just some of the tipping-points that the Outlook finds are now within sight:

  • In 2009, TV advertising revenue globally was double that of Internet advertising – but in 2018 Internet advertising will be a mere US$20bn behind TV advertising.
  • Internet TV advertising will double its share of total TV advertising revenue in the next five years.
  • Mobile advertising will overtake classified Internet advertising in 2014.

For advertisers across all sectors – from consumer products to automotive, and from financial services to retailing – the rapid expansion in digital and mobile advertising underlines the scale of the opportunity to reach more people in ever more engaging ways, and give them more choice and possibilities than ever before.

…with ads tailored to mobile
However, to do this successfully – particularly in mobile advertising – companies will have to do much more than simply migrate ads from the big screen to mobile. While this might be a viable first step, long-term revenues from mobile advertising will demand the development of formats that take advantage of the medium’s native characteristics.

Examples include ads that achieve higher relevance for consumers by using their mobile device’s GPS sensor –building a view of their location over time, and taking advertising effectiveness to a new level. These ads would achieve this by boosting all three key success factors highlighted in the Outlook’s ‘hot topic’ article on mobile advertising: Engagement, identity and insight -  or EI2.

As advertising spearheads the migration to digital and mobile revenues, companies in all industries should follow the money. In my view, it’s an opportunity no business can afford to ignore.

 

Marcel is the global leader of PwC’s Entertainment & Media practice with over 20 years experience of working with and advising companies within the industry. Read more.


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