Agency Sees Ad Dollars Moving to Digital Video

Zenith outlines challenges for mobile marketing

By Jon Lafayette -- Broadcasting & Cable, 2/10/2013 7:14:03 PM

A leading media agency, in a new report, predicts that as usage of new media technology grows, advertising dollars will shift from traditional TV to online video.

"Video continues to be the fastest growing segment of digital advertising, with average CPMs [costs per thousand viewers[ hovering around $26.00. More advertisers are moving TV dollars over to online video as a way to expand the supply pool of video and contain TV CPMs," ZenithOptimedia says in its New Media Forecasts report. "We expect this trend to continue as online video adoption continues to rise, fuelled by more content becoming available through more devices."

The agency says retail, financial services, telecommunications and automotive are the leading categories for digital advertising. But it sees growth in the coming years in other categories. "Consumer packaged goods and entertainment have taken to video in a big way as it enables them to use sight, sound and motion to convey an emotionally charged message. Again, we expect this trend to continue as more advertisers shift TV dollars to video in an effort to optimize their mix and follow the consumer," the report says.

Zenith forecasts that the percentage of American home broadband users will continue to grow from 69.6% in 2013 to 72.9% in 2015. Spending on Internet video/rich media is expected to rise to $5.2 billion in 2013 in 2013 to $8.2 billion in 2015.

The agency sees smart phone penetration jumping from 42.4% in 2013 to 58.6% in 2015. For tablets, Zenith sees penetration growing to 19.4% in 2013 to 26.1% in 2015. IPTV will be in just 6.8% of U.S. homes in 2013 and 7.7%
of homes in 2015.

Zenith says that mobile advertising continues to experience slow yet steady growth as advertisers begin to recognize the benefits of reaching consumers of purchase. "The mobile ad market faces challenges, however, as advertisers can struggle to identify the role that mobile plays in their overall communications plans," the report says.

According to Zenith, rates for mobile advertising remain low, averaging between $3.00 and $5.00, as media companies look to lure more advertisers to test the channel and show revenue on an emerging side of their business.

Only a handful of premium properties have been able to build a profitable business in mobile, Zenith says, pointing to Weather, ESPN, New York Times and Pandora.

"The proliferation of smartphone and tablet adoption, along with faster access speeds, have ignited marketer interest in mobile advertising, however, most still question its ability to drive results," Zenith says.

Zenith predicts mobile ad spending in the U.S. will be $1.8 billion in 2013 and soar to more than $4 billion in 2015.

Advertising across IPTV/connected TVs continues to be a niche, yet growing segment that some brands will occasionally test to gain knowledge, Zenith says.

The U.S. is not the most advanced market when it comes to adoption of new media technology. Zenith identified 19 advanced market ranked according to a combination of absolute size and percent of total ad spend taken in by Internet expenditure.

By that measure, the U.S. ranked twelfth, with an average penetration of 19.4%. That figure is expected to grow to 30.8% by 2015, but at that point, the U.S. will have fallen to No. 14 in the rankings. Zenith ranks Norway as the top nation in adoption of new media technology in 2012, with 38.8%. The agency forecasts that the Netherlands will be No. 1 in 2015, with 65.1% penetration.