How Will Marketers’ Media Spending Change in 2017?
By Ginger Conlon
If marketers are all about the data, then Winterberry Group’s Annual Marketing Outlook is must-have information.
Bruce Biegel, the research and advisory firm’s senior managing director, shared that outlook—providing an in-depth review of marketers' media spending in 2016 and a preview of expected spending for 2017—at the Direct Marketing Club of New York’s annual kickoff luncheon. Winterberry Group’s outlook is based on an amalgamation of extensive research, including the firm’s own findings along with studies from sources such as Ad Age, BIA Kelsey, eMarketer, Forrester Research, IAB, IDC, JP Morgan, and PwC.
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2016 and 2017 in (P)Review ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Despite concerns of hacking and fake news, 2016 was a fruitful year for marketing and ad spending. Total U.S. advertising and marketing spending in 2016 was $347.5 billion, according to Winterberry Group—an increase of nearly 6% over 2015. Winterberry predicts that spending will increase 4.8% to $364.1B in 2017.
A breakdown of the 2016 spending total shows that
> digital advertising/marketing grew 19.9% to $72.9B,
> offline U.S. media/marketing increased 4.5% to $147.8B, and
> traditional measured media/advertising inched up .8% to $125.7B.
“As new money has come in, it's come in to digital,” Biegel said, adding that “digital media spend is something we watch, but it's not as important anymore because digital is just a part of life in marketing today.”
And a big part, indeed. Digital marketing spend surpassed TV for the first time, and by about $2B—even though there was an increase in spending on TV due to the elections, Biegel noted. Conversely, the decline in newspaper spending was greater than Biegel expected. “The spending didn't go away,” he said. “It went to digital because media consumption on digital is increasing.”
Winterberry predicts total U.S. digital media spending to increase 15% in 2017, to $85B. This will include increases across all of its subcategories (see infographic below).
There were a few surprises among all the digital-heavy spending in 2016. Spending on teleservices continued to grow; Biegel predicted that its not going away despite the increasing use of digital. “Direct mail had a good year; it’s growing again,” he said, adding that catalog volume increases were a big part of direct mail volume growth in 2016. Biegel expects to see an increase in programmatic direct mail in 2017 and beyond, he said.
Trends in U.S measured media spending will continue in 2017 very much as they have for the past few years: magazines, newspapers, and radio will continue to see decreases, while cinema, outdoor, and television will experience modest growth (see infographic below). Winterberry expects overall growth of U.S measured media spending to increase .4% in 2017, to $126.2B.
U.S. one-to-one media/marketing spending is expected to grow in 2017, as well. Winterberry predicts a 3.4% increase this year, to $152.9B, representing growth in all major subcategories (see infographic below).
At the core of what's driving change and growth in much of today’s marketing spending is data and databases, Biegel asserted. The cost of building and maintaining databases, especially in email and DMPs, is significant. Plus, there are new types of data, so the data market itself grew about 4% last year. Data spending in the U.S. in support of direct mail, display, and email reach $11.87B in 2016, and increase of 4.1% over 2015.
Winterberry expects this growth to nearly double in 2017, predicting 8.1% overall growth in U.S. data spending in support of direct mail, display, and email—which should equate to $12.8B. This overall growth represents increases in all of the subcategories in this area (see infographic below).
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 2016 Channel Highlights ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
> Direct mail volume increased, largely driven by catalog mail; declines in first class mail volumes continue.
> Addressable TV ad spending doubled in 2016, to about $900M.
>Nearly 79% of email is now opened on mobile devices, which has helped to drive 39% growth in retail m-commerce sales. “Email spend is still small, but has an outsize impact on what people do,” Biegel said.
> Programmatic buying, which has doubled over the past five years, is now at about 63%. “It’s as much about efficiency as auctions and real-time bidding are,” Biegel said, noting that most online advertising is still bought direct but executed programmatically.
> Mobile ad spending reached $33B in 2016, up 54% over 2015. “Are consumers living on their phones or are there more devices?” Biegel posited after noting that time spent on mobile devices was up 7.9% in 2016 over 2015.
> Fifty percent of digital technology and marketing professionals report that their organization now has a DMP in place.
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Trends to Watch ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
As 2017 unfurls, marketers will need to rethink their approaches in response to momentum that has built up in several key areas:
Digital media consumption: Time spent on devices peaks this year. “You can only spend so much time on your devices,” Biegel said. But there are more device types, so the implication for marketers is, “How do I design for cross-device, while being consistent across devices?” It’s both a design and data challenge, Biegel noted. “Marketers need to crack the silos,” he added. “They need data in one view for attribution and reporting.”
Customer journeys: More and more, consumers are giving permission for location tracking for their convenience. “That location data is invaluable,” Biegel said, adding that marketers should use that data for context about where someone is and what they're doing. “The ability to recognize a person in that moment of truth is absolutely critical. Marketers need to be able to activate against this…. If you can't do this, you can't do personalization.”
Social advertising: The rise of influencers will continue. “Influencers are, in fact, the new publishers,” Biegel said. But paying influencers right is still an issue. Marketers need to determine what influencers are actually worth to their brand. Expect the landscape to change as influencer agencies get purchased by larger firms.
Programmatic: Is it possible to use unique creative for each targeted ad placement? Programmatic is forcing brands and agencies to rethink how to produce content, Biegel noted. This means considering how put content together in a way that matters. “But most [marketing organizations] aren't ready to deal with this in terms of process and people,” he said.
Addressable TV: “There’s enough coverage yet to do addressable at scale, but every brand we've talked to is testing it,” Biegel said, pointing out that there was $900M spend on addressable TV in 2016. “We believe that money will shift there.” There was a 20% increase in addressable households in 2016, to 50 million; Winterberry Group predicts 75% coverage and $20B in spend by 2020. For marketers, this means there will be an opportunity to achieve reach and personalization with programmatic TV buying, Biegel said.
Internet of Things: Nearly every IoT device is potentially another advertising platform, Biegel noted. “It’s a nightmare and an opportunity,” he said. Marketers need to ask themselves: “How do we get the insights from the data from these devices?” and “What's the impact of ad formats on all these devices?” Marketers should also consider potential value-added services they can offer via IoT that can drive loyalty.
AI and machine learning: Investments in AI continue to rise, surpassing about $1B in 2016. “AI is critical going forward, but also critical is benchmarking,” Biegel said. One challenge is having the analysts necessary to conduct AI-related analytics. “Take with a bit of a grain of salt,” he advised. “AI is moving faster than the people trying to use it.”
Identity management: Marketers can’t to personalization without recognition. So, it’s not surprising that data onboarding spend doubled over the past year and is forecast to reach $1B in 2020. “We’re bullish on this,” Biegel said, adding that a DMP does not do what data onboarding can do. “It can be part of it, but it’s not the answer by itself.” Recognition though identity matching and validation will be at the center of marketing transformation, Biegel predicts.
Attribution: No, 2017 will not be the year of attribution. Marketers are getting closer, but there’s a talent deficit of about 300,000 people with analytics expertise, Biegel pointed out. “Eighty percent of time spent on attribution is getting the data together.,” he said. The result is that companies are trying to (or should be if they’re not) do more automation up front so analysts can spend more time on analytics and less time on data wrangling.
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.