Will Digital Media Spend Surpass Offline Spend in 2018?
By Ginger Conlon
“From a macro perspective, marketers are coming into 2018 from a much better place than they did in 2017,” Bruce Biegel asserts. “2016 was flat; 2017 was a strong year for growth — slower than expected, but far better than we’ve seen in a while.” That momentum, Biegel said, will help drive 3.8% growth in U.S. offline media/marketing spending, a 15.2% jump in U.S. digital media spending, and a 5.7% increase in U.S. marketing data spending in 2018.
Biegel, senior managing director of Winterberry Group, shared the research and advisory firm’s in-depth review of marketers' media spending in 2017, and a preview of expected spending for 2018, during the Direct Marketing Club of New York’s annual kickoff luncheon. Winterberry Group’s yearly outlook is based on an amalgamation of extensive research, including the firm’s own findings along with studies from sources such as Accenture, eMarketer, Forrester Research, IAB, IDC, JP Morgan, McKinsey, and PwC.
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2017 and 2018 in (P)Review ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Despite the political upheaval in the United States, economic growth accelerated and marketing spending went along for the ride, Biegel said. Winterberry Group estimates 2017 annual U.S. GDP growth at 2.7%, and 2017 U.S. advertising and marketing spending growth at 2.9%. The firm predicts a 2.8% rise in the GDP in 2018, along with 4.8% year-over-year growth in advertising and marketing spending.
Total advertising and marketing spending in 2017 was $301.4 billion, the firm estimates. It predicts that spending to increase to $316 billion in 2018.
A breakdown of the 2017 advertising and marketing spending total shows that
U.S. measured media spending decreased 3.1% to $118.3 billion;
U.S. offline media/marketing spending stayed flat, at $94 billion;
U.S. digital media spending jumped 16.6% to $89.2 billion; and,
U.S. data spending (in support of offline, email, display, and TV) increased
4.9% to $15.6 billion.
“Digital continues to grow in line with shifts in media consumption,” Biegel said, adding that “spending on direct mail is the lowest number we’ve ever seen. It’s kind of slow attrition.”
Biegel also noted that email data spend is getting more and more of the dollars spent on email. “Email still has the highest ROI, but we’re seeing a lot of email still treated as a silo,” he said. “[We’re also] seeing better identity management and context.” He advised doing more to integrate email into multichannel campaigns.
Winterberry’s outlook for 2018 advertising and marketing spending predicts
U.S. measured media spending decreasing 0.8% to $117.4 billion;
U.S. offline media/marketing spending increasing 3.8% to $97.8 billion;
U.S. digital media spending jumping 15.2% to $101 billion; and,
U.S. data spending (in support of offline, email, display, and TV) growing
5.7% to $16.5 billion.
Biegel said that these changes indicate a significant shift: Digital media spending will overtake offline media/marketing spending in 2018 — for the first time. And, he said, Winterberry predicts that digital media spending will surpass traditional media in 2019.
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Measured Media Spending
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Digital Media Spending
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Offline Media/Mktg Spending
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Marketing Data Spending
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2018 Trends to Watch ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
What will drive shifts in advertising and marketing spending in 2018? Here are changes Biegel suggested that marketers track:
Addressable TV: It’s still tough to buy, but is growing nonetheless. About two thirds of households have connected TVs today; that’s forecast to reach 93% by 2021. “We’re going to see addressable TV accelerate as deals come through to make it easier to buy,” Biegel said. Winterberry predicts addressable TV ad spend to increase from $1.3 billion in 2017 to $2.3 billion in 2018.
Analytics and measurement: As much as marketers would like 2018 to be the year of attribution, we’re not there yet, Biegel said. “Attribution still tops everyone’s wish list, but we still have silos,” he said. “No one’s come up with the killer tech solution because the killer tech without the right data doesn’t work.” Winterberry predicts the spending on customer journey analytics to grow from about $4.5 billion in 2017 to $12.2 billion by 2022.
Artificial Intelligence: “AI is not replacing marketing strategists,” Biegel said. “It’s not running campaigns. It’s machine learning right now and is just [handling] repetitive tasks.” With 80% of marketers believing that AI will revolutionize marketing within five years, right now the sentiment should be, “Put it on the roadmap and tell me what to do with it,” Biegel said. “We expect to see more change in this area in late 2018 and 2019.”
Blockchain: “We are not ready for blockchain in advertising,” Biegel emphasized. “It’s kind of like where programmatic was five years ago. It’s still too slow.” He noted that vendors aren’t going to make money from marketers on blockchain right now, but they need to talk about it and get it on customers’ roadmaps.
Brand safety, ad fraud, and transparency: These issues are still top-of-mind. And brands will keep these issues at the top of their agendas until more is done to resolve them. Although providers are making progress, fraud costs brand $46 billion per year, Biegel said. “The promise of the Internet was this huge long tail,” he said. “The reality is, brands are pulling back and buying from only trusted sources.”
Customer experience: “Don’t separate CX and the customer journey,” Biegel advised. “You need to understand the journey to deliver a great customer experience. You need analytics, data strategy, all of that needs to come together.” He noted that 50% of agencies surveyed say that omnichannel CX is driving them to launch a customer journey practice this year.
Customer identity: Marketers need to create identity graphs to understand their customers across channels. Consequently, the spending on onboarding doubled in 2017, and brand penetration of DMPs in the enterprise and midmarket is over 50 percent, Biegel said. Plus, the number of CDP platforms available doubled in 2017. “Nobody has enough data,” he said. “Marketers are going to need multi-source data.”
Customer loyalty: Although two thirds of loyalty program satisfaction is driven by experiential elements, 59% of U.S. consumers feel loyal to brands that present them with small tokens of affection, such as personalized discounts. Paid subscriptions, such as the immensely popular Amazon Prime, are a growing way to cement loyalty, Biegel said, adding a caveat:
“Loyalty is transient and we expect it to continue that way.”
Email marketing: Context will be critical to getting recipients to open, engage with, and click through emails. Marketers will continue to invest in data and automation for dynamic customer journey management and personalization.
GDPR: “This will not be the end of marketing. But there is risk of non-compliance,” Biegel said. “This is a big deal. If this is the first step toward true opt in, a lot of data comes off the table.” With May 2018 as the effective date, and less than half of brands ready for the change, he said, “this is the biggest story of the next 12 months.”
Martech: According to Scott Brinker’s Marketing Technology Landscape 2017, the number of marketing technology firms increased about 40%, Biegel pointed out. And there’s no sign of growth or investment in martech slowing down. “How do you even keep track of them, much less figure out which ones you should have?” he posited.
Mobile: Digital media consumed on mobile devices is $60 billion out of an $80K billion spend, Biegel said. “We think the new phones will up their focus on AR,” he said, adding that a Harry Potter AR treatment coming out this year is expected to be as big as, if not bigger than, Pokemon GO. Additionally, mobile search is capturing $25 billion of search spend and 44% of all mobile spend; with 128 million Amazon Echos expected to be in homes in 2018, this will only increase.
Personalization: Accenture research found that 41% of customers have stopped purchasing from a brand because poor personalization, Biegel said. “If you don’t connect the data right, personalization will fail,” he said, noting that vendors need to do better at helping their clients connect data and marketers need to rely more on machine learning. “One day we’ll do omnichannel personalization, but not today.”
Service providers: Fragmentation continues as agencies and consultancies offer capabilities that overlap. In fact, Biegel said, four of the top 10 “agency companies” worldwide are management consulting firms: Accenture, Deloitte Digital, IBM iX, and PWC.
About the Author
Ginger Conlon, chief editor and marketing alchemist at MKTGinsight, catalyzes change in marketing organizations. She is a frequent speaker on marketing and customer experience, and serves in advisory or leadership roles for several industry organizations. Ginger was honored with a Silver Apple lifetime achievement award for her contributions to the marketing industry.