It has been closing the gap for years, but online will finally surpass TV to become Canada’s largest advertising medium by 2014, according to the latest ad spend forecast from ZenithOptimedia.
Zenith projects Canadian advertisers will spend $3.9 billion on internet advertising in 2013, compared with $3.5 billion for TV.
Online advertising investment was less than half that of TV as recently as 2008 ($3.4 billion versus $1.6 billion), but the rapid development of emerging channels like mobile and online video is fueling growth in the space said the report.
The report projects double-digit growth for online advertising throughout the forecast period, as mobile and video achieve critical mass. Investment in online display and search has already surpassed magazines and out-of-home, with Zenith predicting “moderate” growth for both of those channels. Online classifieds will be flat, with email advertising revenues softening.
TV advertising is expected to fall 1.4% to $3.4 billion this year, with conventional TV stations absorbing the brunt of the losses. Specialty and pay stations posted a 2.4% gain for the broadcast year ended August 2012, off the pace of previous years but ahead of conventional TV, which experienced a 4.4% decline.
The current broadcast year has been much the same said the report, which predicted that TV revenues would stabilize with an improving economy.
Ruth Klostermann, executive vice-president of strategic resources for ZenithOptimedia in Toronto, said broadcasters have “wised up” to the challenges posed by upstart services like Netflix.
At the recent up-front presentations, broadcasters were describing themselves as “multi-platform providers” in an effort to highlight the scope of their advertising offering. The recent spate of Twitter deals in the U.S. and Canada further underscore broadcasters’ efforts to adapt to the new digital marketplace, said Klostermann.
At the same time, the growth of streaming services is profoundly affecting viewer tolerance of advertising. “The more we watch Netflix the more intrusive commercial activity seems in broadcast television,” she said.
While newspaper advertising isn’t intrusive, there simply isn’t enough of it. Newspapers have lost more than $715 million in annual revenue since their historic high of $2.66 billion in 2005, with Zenith projecting spending to fall another 4.4% to $1.9 billion this year.
While the media industry has enjoyed moderate success with its paywall approach, ZenithOptimedia predicts a “long road of experimentation” ahead as the industry tries to find an optimal approach to its business.
The magazine industry is experiencing similar issues, said ZenithOptimedia, with a recent Alliance for Audited Media (AAM) report noting that circulation for audited publications was down a combined 3.5% in the last six months of 2012. Ad revenues are projected to fall 3.4% to $574 million this year, followed by a 1.6% decline in 2014 before a slight rebound in 2015.
Radio remains buoyant among traditional media, with advertiser spend expected to hit $1.6 billion in 2013, a 1.6% increase. Retail advertising is vital to radio, and increased competition in the space – largely attributable to the arrival of Target earlier this year – has benefited the medium, said Klostermann.
If approved by the CRTC, the CBC’s application to sell commercial airtime on its music stations CBC Radio 2 and the French-language Espace Musique could also have a profound impact on the radio landscape, said Klostermann. But while creating additional radio inventory, it also has the potential to drive away audiences accustomed to listening commercial-free, she said.
Both radio and out-of-home – forecasted to grow 1.7% to $492 million in 2013 and an average of 2.1% over the next three years – are bellweathers of the economy, said Klostermann. Because of their short lead times, they are among the first categories to benefit from economic improvement.
Out-of-home operators continue to expand their digital inventory through both indoor and outdoor networks, which is expected to contribute to 2.1% annual growth over the next three years.
