Adspend analysis: The rise and rise of online video
In the final of our exclusives, Warc’s James McDonald looks at how the growth in view-on-demand ad expenditure is shaping the market.
Online video advertising expenditure is forecast to exceed £800m next year, at which point it will account for a quarter of all internet display adspend, according to the latest data from the Advertising Association/Warc Expenditure Report, released this week.
As we’ve already learned this week, display remains the largest contributor to total UK advertising expenditure, but its share has been falling over recent years due to the rise in internet search ad revenue.
Within internet, however, the opposite is true. Despite our expectations for record-high search adspend of around £4.6bn next year, its share of the total online market is currently being eroded by display.
It’s worth noting that for the purpose of this analysis, we refer to internet adspend as outlined by the Internet Advertising Bureau, inclusive of online ad revenues for news and magazine brands, radio websites and broadcaster VOD.[advert position=”left”]
In 2000, when the IAB began monitoring internet advertising expenditure, display outweighed search by a ratio of 10:1. But the tide had turned only three years later, and search has provided the greater share of online adspend ever since. At its highest point in 2009, almost three in every five pounds spent on internet advertising went to search.
Since then, however, search’s share of total internet adspend is expected to have fallen 8.7pp by the end of next year. This compares to a 12.5pp rise in display’s share over the same period. Display is also taking share from classified, including recruitment.
Further, within mobile, display is forecast to replace search as the largest revenue generator for the first time next year.
The resurgence in display advertising expenditure is being driven by strong rises in online video adspend. To put video’s influence into context, between 2012 and 2016 we predict an average growth rate of around 19% in internet display ad revenue. That rate falls closer to 14% with video removed, behind the average rate for all online spend during this timeframe.
By the end of next year, we forecast that the online video ad market will be worth over £800m – a quarter of total online display.
The rise in online video adspend is being caused by growth in both broadcaster VOD ad expenditure (including, but not limited to, ad revenues for ITV Player, All 4 and Sky Go), and ‘other’ online video ad revenue for the likes of YouTube.
Growth among this ‘other’ group is expected to average 47.8% between 2012 and 2016, compared to 29.5% for broadcaster VOD, though this is unsurprising given the uneven pools.
Within online video, spend on pre/post roll is by far the largest contributor to the ad revenue stream, and we expect this form ad expenditure to outweigh that of social (a non-interruptive, user-initiated video format sold on a cost per engagement/view basis) by 16:1 next year.
From classified to search to display, the influx of expenditure for online advertising has been transforming the UK market over recent years. What’s more, the strong growth in internet adspend is expected to be maintained for years to come – boosted by markets such as online video, native and search, which are, in turn, benefiting from the seemingly inexorable rise of mobile.
James McDonald is a research analyst at Warc.
—-
To find out more about subscribing to the AA/Warc Expenditure Report please visit the website.
Mediatel subscribers can also now gain access to adspend and revenue figures by medium and aggregated forecast trends by medium from AA/WARC, Carat, eMarketer, GroupM and ZenithOptimedia in the Media Landscape tool.