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Future predictions for online advertising – tsunami or ripples?

Much like the Ministry for Civil Defence, we in the online advertising game feel compelled to warn you about the internet medium’s capacity for seismic shifts in the media core. We’ve talked long and hard about the fact that the huge roller will come. Many of us may have thought we’ve seen its crest, but Josh Borthwick asks has it all been too early? Is 2010 really the year for online advertising in New Zealand, or is this another one metre swell dribbling through our industry unnoticed?

Last year online advertising grew 10.6% in the toughest economic times we’ve had in many of our lifetimes, some say since the great depression. A great deal of us in all facets of media experienced hardships, but it would seem that in this instance online had a bit of a coming of age. As it was in the great depression, New Zealand wasn’t hit as hard as the USA and UK. Godzone wasn’t as far ahead with digital advertising’s total share of media revenue as these markets and therefore still had plenty of room for growth.

Anecdotally more brands entered the market than previous years and those that were already there increased spends, generally at the expense of other media. <Update> It seemed almost fait accompli that online would have overtaken magazine advertising spend in 2009, when the ASA figures were released last week. As it turned out – online was within a whisker of pipping mags. The big increases in online advertising spend showed marketers were driven to online after being forced to think differently, get better returns on their media investments and follow media consumption patterns of their customers. Customers who put the breaks on spending and pushed all the way to the floor on free information and entertainment.

So what’s next on the horizon for the medium? In the UK it overtook television spend and it seems reasonable to assume it’ll overtake magazine and radio here in 2010. Just a 15% increase (and remember it’s been increasing at least 20% in previous years) and it’ll only take a minor slip in total revenue for radio to be left gasping on the sidelines. What of print and television? It’s plausible that online could over take both, but Zenith Optimedia’s worldwide predictions are for it to have about 16% of total media spend by 2012 while television, possibly in conjunction with web as the lines blur, will grow back from it’s recent dip to around 35%. Magna Global are more bullish with their forecast of a 21% share by the same period.

Amongst all the stats and predictions there are a number of concrete things taking place in NZ. Agencies are winning or losing business based on their ability to provide digital strategy and execute it effectively. Clients who’ve shifted budget from other media have seen results, experienced opportunities and aren’t likely to reduce their spend in online. Marketers are seeking brand opportunities online and neither search nor performance campaigns will provide them; support them yes, provide them, no. Brand budgets can be a lot bigger and branding experiences excite creative agencies. As experience in online branding increases, everyone’s thinking about how to resource campaigns after they’ve started.

Some of these shifts are demonstrated in global trends such as those from a report by the Society of Digital Agencies (SODA) based in the US. The group is comprised of 41 digital agencies and it polled hundreds of its directors, their clients and traditional agency partners for trends they were seeing in the market:

When asked “What advertising performance metrics are you (or your clients) most interested in?” the increased interest in Time On Site suggests a move to measuring potential interaction and engagement with the brand. The shift away from CPC or other performance measures further reinforces the web’s (or mobile’s for that matter) increased importance as a brand (above the line) medium.

Respondents were also asked to estimate the percentage of their digital marketing budget that will be invested in a number of key digital areas:



Infrastructure trumps all other facets of digital campaigns in these results, which signals another coming of age for online as professionals embrace the need to manage their campaigns and digital brand-points as ongoing, evolving organisms.

The problem of buying and managing such fragmented placements, publishers and formats still presents opportunities for advertising networks, aggregators and agency proprietary systems. The former increased in number (particularly vertical networks representing niche content or special interest groups) and the latter still has some way to go, but big sums are being put up to make it happen. Locally Flossie Media changed tack, while 3DI remained focussed and for our part adhub increased advertising revenue by 46% between May – September 2009.

Adify in the US (and Australia) deals with a huge array of vertical networks and media buyers through its optimisation technology and found more than two-thirds of buyers are using online advertising networks because they offer cost effective targeting of niche audiences. Adify Media’s December survey was completed by 216 media planners, interactive marketing directors, and executives from top agencies including Carat, Mediavest, MPG, Ogilvy, OMD, Starcom, and Universal McCann.

We at the IAB NZ are bullish about this year. No one expects online advertising to slow its growth and (compared to some) my prediction of 15% is conservative! There is a definite sense that things have picked up in the first quarter of 2010. Bookings are high, planners are busy and the market generally feels like its pulled itself out of last year, shaken off the debris and strode into the year.

Now of course non of these things are likely to bring a tsunami of change over our businesses all at once. Change it seems (much like the distorted weather patterns from earthquakes) ripples to our fair shores, but it pays to heed the signs and warnings, because what looks fairly harmless from 500 metres away can very quickly capsize your boat if you’re not prepared for it.