The latest MAGNA report highlighted that digital media drove global ad sales to +5.6 per cent in 2016. Digital advertising sales (display, video, search, social) grew by +17 per cent to USD 178 billion while offline media sales (linear TV, linear radio, print, out-of-home) were flat (-0.3 per cent) at USD 315 billion.
Breaking down the report’s digital data, Scott McBride, IPG’s Chief Digital Officer APAC, talks to Digital Market Asia about the biggest growth drivers for digital in the region.
Within digital, growth is being driven by search and social spend. Search and social combine to represent 83 per cent of total incremental dollars across all media formats. In many large markets in APAC, the contribution to total incremental growth from search and social is even higher, such as China (90 per cent), Japan (95 per cent) and Australia (96 per cent); essentially all growth in many markets is coming solely from search and social spend increases.
Mobile leads the way
Because of how closely linked search and social are with the transition to mobile devices, it’s no surprise that mobile spend in APAC increased this year by +40 per cent to over USD 26 billion, representing more than half of total digital advertising spend for the first time. By 2021, mobile digital spend is expected to increase to USD 64 billion and represent 72 per cent of total digital spend.
The report finds that within digital advertising, mobile-based impressions and sales are the primary growth driver. In APAC mobile advertising increased by +39.7 per cent this year to reach USD 26.3 billion, or 51.5 per cent of total digital advertising dollars. Growth is expected to remain robust in 2017 (+25.9 per cent), when mobile will become the majority of digital advertising dollars for the first time. The fastest growing portions of the digital advertising economy are the formats that are most rapidly transitioning to mobile spend: social media, video, and search advertising. In fact, not only is mobile the largest contributor to digital advertising growth, but 2016 was the first time that there was no growth for desktop-based ad sales.
Social & search: The apple of 2016’s eye
2017 will also be the year when the majority of ad sales (52 per cent) are generated by mobile impressions, driven by the rapid growth in social and search usage on mobile devices.
The advertising market is increasingly concentrated around a few formats and a few vendors. The bulk of net market growth in 2016 (USD 26bn out of USD 27bn) came from digital ad sales. More specifically almost 90 per cent of the global growth came from two advertising formats only: search and social. In some markets, like Western Europe, search and social alone actually represented 110 per cent of the net market growth, meaning that everything else combined (including digital display and video) shrank last year.
The two global media vendors dominating search and social, Google and Facebook, together control just over half (54 per cent) of total digital advertising spend (vs 44 per cent a year ago). With digital advertising approaching 40 per cent market share in 2017 and forecast to reach 50 per cent by 2021, it is time to revisit statistical categorisations and think in terms of future-proof formats or genres, in addition to than consumption platforms.
The blurring lines of social & mobile
Discussing whether spends on Facebook on mobile will be considered social or mobile, Mr McBride said, “Facebook is social which accounts for 79.2 per cent on mobile, worth 4.7 billion. If we look deeper into countries we will see that Facebook is mobile, in the Philippines Social is a 76.2 per cent share of mobile. Whilst when looking at Hong Kong, social in Mobile is only a 4.4 per cent. When considering Facebook it is important to decouple the platform behavior and the method by which people access and engage on the platform. Therefore one can say Facebook is a social platform for which consumers access across desktop, mobile and tablet, and in some cases multiple devices at the same time.”
Ad blocking affecting desktops?
The report highlights that one factor accelerating the shift to a mobile-centric digital market is the stagnation in desktop impressions caused by ad blockers while blockers are largely ineffective so far in the mobile, app-centric environment. Desktop ad sales will begin to shrink in 2017, and will be in permanent decline thereafter.
“In previous years the opportunity provided by mobile has been limited due to less creative and engaging banner ad units. However the industry has rapidly recognised the consumer rush to mobile, the evolution of HTML5, and applied more innovative ad units and formats seamless with the native smartphone experience” says Mr McBride.
Programmatic yet to find roots
Asia Pacific is the second largest programmatic region, and represents 22 per cent of global programmatic spend. APAC recently passed EMEA to become the second largest region. By 2020, it will be more than 15 per cent larger than EMEA, with the gap continuing to widen. APAC includes the second and third largest programmatic markets (China and Japan). It also includes some of the most highly developed global programmatic markets.
APAC has many factors that indicate strong growth potential, but also significant limitations, such as a fragmented ad tech landscape, issues with data access, and tendencies towards difficult to scale non-RTB transactions.
Because of the way consumers’ access content, and how media owners approach content design, APAC is significantly more mobile (42 per cent) than the global average (35 per cent).
Mr McBride says, “Australia and China are leading the way programmatically but their momentum will slow down. If you look at Indonesia, programmatic only has a penetration of 11 per cent but its growth is closer to 100 per cent. Access to private market place is set to increase, unlocking a more culturally relevant buy.”
Video, 2016’s biggest game changer
According to MAGNA estimates, video ad formats already account for nearly 15 per cent of the advertising of social media. Behind the explosive growth of social video are mainstream consumer brands, previously spending very little with social media and attracted by the “best-of-both-world” promise (creative impact of TV commercials, targetability and accountability of social networks). Their social video effort has been funded partly at the expense of other digital video formats, and partly by additional budgets, and mostly in addition to their linear TV campaigns.
Other digital video ad sales (including revenues from full episode players, Youtube and video ad networks, but excluding social video) grew by +27 per cent globally this year, characterised by rapid increase in YouTube sales on a global basis, and positive growth for premium content on FEP platforms.
The long tail of digital video is also re-energised with non-video-centric websites (e.g. news) running an increasing volume of ‘outstream’ autoplay video commercials, frequently bought programmatically. Next year, digital video growth will remain around +27 per cent.
APAC video grew 27.5 per cent to 5.3 billion. Desktop remained the main platform with 57.4 per cent but we will see a shift in 2017 where mobile will increase 5.7 per cent to 48.3 per cent. By 2021 this will rise to 65.4 per cent.