2016: The year advertisers pulled back on digital
Spending gains slowed, after years of gangbusters growth
January 25, 2017
Digital remains the driver behind most of the gains being seen in the media economy. That includes the 6.8 percent growth during 2016.
But digital’s long-torrid pace of growth is slowing. During 2016, it was up 13.3 percent, well below its 19 percent compound annual growth rate from 2012-‘15, according to a new report on full-year spending from Standard Media Index.
Gains slowed further in fourth quarter, with digital up only 7.1 percent.
SMI, which tracks 70 percent of national agency spending and models the rest based on trends, says that will continue in 2017.
The research outfit says many advertisers are correcting earlier over-investment in digital. They found it didn’t deliver the same results as television, which they’d moved much of their money from.
The 2016 numbers reflect many of those advertisers switching money back from digital to TV.
“These were the categories we saw who pulled a lot of money out of TV to invest in digital back in 2015,” says James Fennessy, CEO of SMI.
“We have heard from numerous sources that sales suffered as a result, and rebalancing the portfolio has had a positive impact on sales in 2016 as they poured money back into national television.”
That’s the main reason, but not the only one. Fennessy also points to concerns about viewability, with advertisers worrying their ads are not being seen.
And of course there are continued issues related to ad fraud. Advertisers got particularly riled up at the end of last year when Facebook admitted to several reporting problems that inflated its metrics.
“Advertisers now recognize that attribution and measurement on digital platforms isn’t as cut and dry as they were led to believe,” Fennessy says. “These recent issues have created a lot more focus here.
“Digital isn’t going anywhere, but we expect marketers to ask a lot more questions around quality and efficacy, and TV will benefit as a result.”
It certainly did in 2016. The medium rose 4.4 percent, boosted by political and Olympics, certainly, but also from a return from advertisers who had wandered away in 2015.
On that list: Paramount Pictures. It cut TV spending by 3.8 percent in 2015 but bumped it back up 24 percent last year; Target, which slashed TV budgets by 20 percent in 2015 but increased spending 12 percent last year; and Progressive, which reduced 2015 TV spending by 5.5 percent but came back last year with a 6.2 percent gain.
Other traditional media struggle, beyond digital
While TV improved, it was not a great year for print. As one might expect, spending dropped for magazines (off 9.1 percent) and newspapers (off 13.9 percent).
Radio remained relatively steady, slipping only 0.5 percent, thanks to continued loyalty from core categories such as auto and telecom.
Out of home actually increased by 6.9 percent, which SMI says most likely reflects political billboard buys.
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