Spending on internet advertising will quadruple in the next five years as technology drives it from being the adworld’s little sibling to the industry’s Big Daddy, taking half of the total global advertising spend by 2018.
This is the bold forecast of Google Inc.’s Chief Business Officer and SVP, Nikesh Arora, at the recent D: Dive into Media Conference in Dana Point. His prediction may strike many as counter-intuitive. Anyone who knows anything about online advertising sales, from business development managers to search engine marketing specialists to advertising sales managers, can tell you that ad execs can be a pretty conservative bunch and prefer to stick with what they know works. That’s why $700 billion of the $800 billion global advertising budget still gets poured into TV and print.
A sea change beckons
But the modest spend on internet advertising today will expand by at least another $300 billion in a few years, Arora believes, thanks chiefly to one big catalyst: internet-connected or “smart” TVs. As Arora put it:
“There’s currently about $800 billion in the global advertising market today. That’s a very large number, but online advertising accounts for less than $100 billion of that number.”
He went on:
“There is a reasonable probability that over 50% of advertising goes online in the next five years. The big tipping point we’re waiting for is internet-connected televisions. We’re waiting for things going from ‘nice-to-have’ to ‘must-have.’”
The rise of the smart TV
Given that the advertising industry has been using the same model for the best part of a century, the scale and rapidity of the transition envisaged by Arora seems ambitious. But Google has been hard at work persuading the industry over the last decade that internet advertising really can make money.
A sign of things to come can be discerned in its transformation of YouTube, a development which has made it massively more appealing to users and advertisers alike. Google has spent in excess of $100 million over the past few years to create new channels, and according to its chief, Salar Kamangar, a video packaged into a specific channel can attract 10 times more ad spending per 1,000 users than if it simply stood alone.
So far, Google’s success with smart TVs has been questionable; but that could be about to change.