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Online advertising will account for more than half of all U.S. ad sales this year, according to a study, surpassing US$100 billion for the first time and marking a milestone in the shift of money, time and attention to the internet from older media.
Having already exceeded the combined ad sales of print, radio and TV, online advertising in the U.S. will increase 16 per cent to US$106.6 billion, researcher Magna Global said in a report Thursday. Led by Google and Facebook, the growth will boost the overall U.S. advertising market to a record US$207 billion this year.
Alphabet Inc., parent of Google and YouTube, and Facebook Inc. account for most online ad sales and show little sign of slowing down. Ad revenue from web searches, dominated by Google, grew by 18 per cent in the second quarter, Magna said. Ad sales on social networks, led by Facebook, jumped 36 per cent. Amazon.com Inc. has also emerged as a big recipient of ad dollars, with projected revenue of US$4.61 billion, according to EMarketer Inc.
Some of this digital growth is coming at the expense of TV, once the dominant medium for advertisers. National TV ads will rise 0.8 per cent this year, Magna said, but only thanks to events that don’t occur every year, such as the Olympics and U.S. mid-term elections. Excluding political ads, local TV sales will be down more than 4 per cent.
The audience for major TV networks has been declining for many years, as more viewers waited to watch shows on-demand or abandoned conventional TV for streaming options like Netflix and Hulu. TV networks have managed to stave off revenue losses by charging higher prices for their ads, avoiding the painful declines seen in radio and print.
But even that strategy is starting to falter. TV ad sales have declined in seven of the last eight quarters and are forecast to retreat for many years ahead.
“An increasing number of brands are being priced out of prime-time or network TV altogether,” said Vincent Letang, an executive vice president at Magna.
Internet companies have positioned themselves to siphon even more ad dollars from TV by investing in video. Google owns the world’s most popular advertising-supported video site in YouTube, and Facebook has rolled out advertising-supported video in several countries.
Sales for advertiser-supported video on the Internet climbed 28 per cent in the second quarter and should eclipse both print and radio advertising by next year, Magna predicted.