Ad Spending For Digital Media Poised To Pass Broadcast TV – Forecast

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The lines were bound to cross sometime. And 2015 is when core Internet spending will surpass broadcast TV — including its offshoot online services — according to a forecast out today from FTI Consulting.

The firm projects that Internet spending will rise 11.4% to $41.8 billion while broadcast lifts just 0.9% to $38.9 billion. Cable, also including online, is expected to be up 6.2% to $33.4 billion. Advertisers still spend more on direct mail — $44.2 billion — than they do on Internet. But that will change in 2016.

In 2018, FTI expects advertisers to lay out $55.6 billion for online, $45.5 billion for broadcast, $40.0 billion for cable, and $44.2 billion for direct mail.

“While it is difficult to completely isolate one factor that is driving changes in ad spending from the historical trends, our model suggests that digital substitution is the primary driver contributing to changes in the television ad ecosystem today,” says FTI Media & Entertainment Team Co-leader Philip Schuman. “We believe that effective data-driven targeting, low CPMs and vast inventory, as well as a direct feedback loop that enables advertisers to calculate a return on digital advertising dollars spent, has enabled them to allocate less to get more.”

The firm says that ad spending is dropping as a percentage of Gross Domestic Product. Last year, at $212.2 billion,  it accounted for 1.2% of GDP vs the historic average of 1.6%.

Digital will remain the only major growth driver — rising from 22% of the market to 30% in 2020 and 35% in 2040.  “In fact, we are closely monitoring the possibility that digital’s penetration of the advertising market may be accelerating,” says the team’s other Co-leader Luke Schaeffer.  “There are a few initial indicators that the hastening of digital video advertising may be causing such acceleration. If that does indeed prove out, we estimate the digital video ad trend could eliminate much of the forcasted growth in television advertising over the next five years.”

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