Does the rapid growth of Internet promote the growth of Ad business as a whole?
The answer is no – according to this Bloomberg article, despite the rapid growth of Internet and Internet-related advertising, the percentage of ad industry as a whole in GDP has stayed rather flat since around 1950 while other industries have seen large shifts. Its growth basically matches the growth of economy as a whole. This may seem surprising as we’ve seen so many new technologies and algorithms around Internet Ads. However, as the article states, “Advertisers have failed to convince the client community of the value of advertising as an investment.”
On the other hand, inside the Ad industry we see significant shifts of dollar splitting among old and new media. From the graph, we can see that Internet is mainly stealing the Ad dollars from Newspapers rather than magazines, radio, and TV cable which remains relatively flat in their percent share of advertising.
As the growth of Ad industry matches the economy growth as a whole, the inside splitting probably also mirrors the growth and decline of these medias. The Internet has already succeeded in stealing newspaper’s share; so what should be its next step? How will Internet Ad industry keep this rapidity of growth?
First, the growth of Internet ads will be following the growth of Internet itself no matter what. So the Internet has to keep growing (which does not seem to be a problem in the near future.)
Second, the Internet industry could try to steal from other parts of the pie – the TV cable still occupies most of it. As online streaming services continue to grow, we are hopefully seeing their ads – similar to the TV ads in their form but more personalized – to become more attractive to clients.
Third, as Internet ads are becoming increasingly customized and personalized, we should see a promoted conversion rate, making the client community more willingly to invest in Ads. However, the privacy of people being targeted is becoming an increasingly controversy topic, and Ads company should beware of it.
Source: Advertising’s Century of Flat-Line Growth, by Eric Chemi, http://www.bloomberg.com/news/articles/2014-03-03/advertisings-century-of-flat-line-growth