Spending on online advertising is set to overtake expenditures on broadcast television this year, becoming the largest media category, according to a new forecast.
Online ad spending will climb to $41.8 billion this year from $37.5 million in 2014, according to an annual study by FTI Consulting, which projects online spending reaching $55.6 billion by 2018. The figure excludes online ad revenues collected by traditional media businesses, including broadcasters, newspapers and magazines.
From 2015 to 2018, FTI sees digital ad spending growing at a 10.3% annual rate, significantly faster than the 4.2% growth forecast for the broadcast TV sector. The slight growth will lift broadcast revenues to $45.5 billion in 2018 from $38.9 billion in 2015.
FTI’s model — driven by expected changes in macro-economic variables such as consumer spending, corporate investment, employment, digital advertising growth and political advertising — projects overall advertising growth from all forms of media (including TV, digital, print, direct marketing and outdoor) will increase this year by 2.4% in comparison to a 3% increase in 2014.
“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,” Philip Schuman, senior managing director and coleader of FTI Consulting’s Media & Entertainment team, said in a statement. “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 forecast calls for a “modest surge” in spending 2016 and 2018, election years, with growth rising to 4.3% and 4.4%, respectively. But spending gains will be a paltry 1.8 percent in 2017. Combined, total ad spending should rise from about $212 billion this year to approximately $241 billion by 2018.