Facebook is poised to siphon TV ad budgets (FB)

BI Intelligence

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Morgan Stanley analysts anticipate that a new video-only tab on Facebook — a feature that is being tested but hasn't been rolled out yet — will enable the social network to seize additional ad spend from TV, Business Insider reports.

TV ad revenue in the US totaled close to $70 billion in 2015, according to PwC’s Media Outlook. Of this, the big four national networks — CBS, FOX, ABC, and NBC — represented 58% of revenue. But traditional TV's ad model is under increasing pressure as linear audiences shift online to video sites like YouTube and Netflix. Morgan Stanley expects this to worsen when Facebook debuts its own video portal:

• TV advertisers have been reluctant to shift budgets to Facebook. The reason, according to Morgan Stanley’s findings, is that videos and ads in the Facebook News Feed are too fragmented and interspersed among other kinds of posts.
• The Facebook video tab would resolve TV advertisers’ concerns. It’s a destination designed purely for video consumption, where users can search and discover videos they’d like to watch, including posts from pages, popular live videos, and posts from friends.
• Facebook has been testing this feature for the better part of a year. In the most recent earnings call, CEO Mark Zuckerberg revealed that initial tests for the “video home” had gone well, and that he was hopeful and excited about widely rolling out this feature soon.
• The video tab threatens both TV and video sites like YouTube. Facebook’s new video hub serves a similar, if not identical, function as YouTube, which has siphoned the most TV ad spend thus far. Last May, for instance, advertising group Interpublic committed to shifting at least $250 million in TV ad spend to YouTube.
• Facebook has been refining its pitch to win over TV advertisers. This includes creating an ad-buying tool that works like buying spots on TV, to make purchasing easier for broadcast advertisers on Facebook. Meanwhile, more recently, a Facebook-commissioned Nielsen study showed ads on the social platform reach an additional 5% of people who can’t be reached on TV.

Consumers continue to increase their time spent consuming digital media, while advertisers continue to increase their ad budgets into digital channels.

The influx is not expected to let up in the near future. The US digital advertising industry will continue to experience remarkable growth through 2021 to reach nearly $100 billion in annual revenue, driven primarily by the sustained migration of ad dollars from traditional TV to digital video and the continued increase of social spending. 

Overall, the strong growth of the US digital ad market can largely be attributed to increased time spent by consumers on digital media and brands' increased comfort with allocating budgets to digital formats, particularly on digital video. In a recent 2016 survey of almost 400 US ad agencies and marketers, the IAB found that two-thirds of respondents plan on increasing spending on digital video in the next year. 

Moreover, mobile will become the top destination for digital ad spending as advertisers continue to attempt to resolve the disconnect between the rapid growth in time spent on phones and tablets and the relatively small share of ad budgets that are allocated to such platforms — known as the mobile opportunity gap. In fact, mobile is set to eclipse desktop ad spend by 2018.

Dylan Mortensen, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on U.S. digital media ad revenue that forecasts revenue trends over the next five years and outlines the key growth drivers for overall digital ad revenue in the U.S.

Here are some key points from the report:

• US digital ad revenue is expected to reach nearly $100 billion by 2021, according to BI Intelligence estimates. This represents compound annual growth of 8% from the $68.9 billion expected in 2016. 
• Mobile is positioned to become the top destination for digital ad spending as advertisers continue to attempt to close the "mobile opportunity gap."
• Digital video advertising will grow faster than any other segment over the next five years, as consumers shift time spent online to phones and tablets. Revenue in this category is forecast to rise from $8.5 billion in 2016 to $23 billion in 2021.
• Social advertising in all formats is gaining traction and will be among the key drivers of digital ad growth in the next five years. Social ad revenue is poised to climb to $30.8 billion by 2021, up from $15.5 billion this year.
• Artificial intelligence, augmented and virtual reality, and sponsored content will help propel further digital ad growth in the next decade.

In full, the report:

• Forecasts US digital ad revenue through 2021.
• Highlights the rising popularity of digital media with consumers and brands.
• Explores why digital video advertising growth will exceed all other formats over the next five years.
• Outlines emerging technologies that will help propel ad growth in the next decade.

To get your copy of this invaluable guide, choose one of the following two options:

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of digital media ad revenue.