May 18, 2017 - Economy

Digital video ad spending is growing but TV is still huge

Marketers have almost doubled spending on digital video advertising since 2015, according to a new study from the Interactive Advertising Bureau. Also 80% of marketers and media buyers plan to increase spending in original digital video through the end of the year. But digital video ad revenue has a long way to go until it catches up to TV.

Data: eMarketer; Chart: Lazaro Gamio / Axios
Data: eMarketer; Chart: Lazaro Gamio / Axios

The big question: Experts have long predicted that TV ad spending will eventually plummet, similar what happened in newspapers in 2000, but the timing will likely depend on a few factors, like retransmission and programming contracts, and most importantly, ad-buyer efficiency.

TV isn't dead, yet: Despite the explosion of mobile video, Americans still watch TV more than any other medium. Per Nielsen's latest Total Audience Report, U.S. adults spent 86% of their media viewing time with traditional TV, compared to only 14% for all other screens combined. However, digital investments now are still important, as these margins shift dramatically towards digital for younger audiences who are migrating their content consumption habits to mobile and cutting their cable cords in favor of cheaper, on-demand options.

"TV ad rates have without question gone up," says Steve Passwaiter, Vice President and General Manager at Kantar Media, a widely-used advertising measurement group. "Every year you hear about them (networks and cable channels) bumping up CPM'S (cost-per-thousand rates) by 8-10% just because it takes so many more spots to accomplish the same targeting goals than it did 10, 20 years ago. But at the same time, every year the subscription numbers keep shrinking, creating an artificially inflated supply and demand.

"For TV networks, right now, it's a perfect storm."
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