Media Outlook 2011: Digital

The last time the country looked to be heading into a deep, dark recession—way back in 2008—the consensus among analysts and prognosticators was that digital wasn’t likely to get clipped. The thinking was that brands, during a time when accountability and efficiency were of utmost importance, would gravitate to the most trackable and affordable medium.Then reality hit. Even the Web wasn’t spared by The Great Recession.Now, as 2011 nears and the chance of a double-dip recession—or at best a weak recovery—looms, pundits are generally singing the same song, albeit in more confident tones. People now live their lives on the Web—consider Facebook’s hold on people’s attention alone compared to 2008. Most believe that brands simply won’t be able to cut back on the medium, even if the economy sputters.According to eMarketer, after a 3.4 percent dip in spending in 2009, online ad revenue in 2010 will jump 10.8 percent to $25.1 billion. The following year looks nearly as strong, as the researcher is predicting growth of 8.4 percent, bringing total spending to $27.2 billion. That won’t hold true for media in general, says Geoff Ramsey, CEO of eMarketer, meaning that digital dollars are likely to grow at the expense of other sectors like TV and print.Similarly, PricewaterhouseCoopers is forecasting 9.8 percent growth in spending on the Internet, with revenue netting out at $25.2 billion. “We’re still very keen on our numbers,” says PwC partner Russ Sapienza.Among digital buyers, few report panicky clients, and most expect budgets to remain intact through at least the rest of this year. In fact, some are reporting a welcome stability in the market. “Over the last 18 months, we’ve seen a scatter-based approach to digital spending,” says Kelly Twohig, digital activation director, Starcom USA. “We’re seeing that long-term commitments are back. Most clients are out in front of 2011 planning, and buyers are actually going into the marketplace less frequently.” Twohig says that was especially true for video, which remains in high demand. It’s not to say that online advertising is not without its challenges—particularly on the display front. There is still an abundance of ad inventory on the Web—especially in social media.While Facebook is expected to surpass $1 billion in revenue in 2010 “[online advertising] growth would be better if social media were a better place for paid media,” says Ramsey. “[Social media sites] are growing advertising from a small base. Unless we find a different ad model, it isn’t as monetizable [as other media] by any stretch.”Another ongoing challenge facing Web publishers is that many traditional advertisers still haven’t bought into display advertising as a branding vehicle. That’s why organizations like the Interactive Advertising Bureau (IAB) and the Online Publishers Association are pushing hard for improved creativity and bigger, bolder units on the Web.Sapienza believes the industry needs to adopt new tactics in selling its brand value: “If I’m at the IAB, I’m waking up every day and seeing the percentage of dollars spent with their properties. It doesn’t match the time people spend with the medium. I’m asking, ‘How do we get ourselves back into the equation?’”Plus, digital has to get easier to buy, argues Sapienza. That need for efficiency is one of the reasons that digital agencies are rapidly adopting audience-based, real-time buying via exchanges and trading desks—another huge trend to watch for in 2011. Not only does this tech-centered buying promise laser-focused targeting, but also reduced buying friction. While Twohig expects that a third of her agencies’ dollars will eventually be spent via demand-side platforms, obstacles remain. “There can be lots of discrepancies among different publishers and networks. It will set the industry back if we don’t get that right,” she says. Meanwhile, as the display market looks to become more scientific, to no one’s surprise, search remains the most precise, and thus most lucrative, part of the online ad market. Per eMarketer, search will account for 49 percent of online ad dollars in both 2010 and 2011. The story in 2011 won’t be whether brands spend in search, but rather how well Microsoft integrates Yahoo’s search queries onto its own platform, a process that will begin in Q4 of this year.Another sector that many will be watching with great anticipation in 2011 is mobile, as smartphones now represent a quarter of the U.S. market, says Ramsey. Few doubt that mobile ad spending will grow; eMarketer predicts spending will surge by 40 percent to $830 million. However, “the base is so small,” says Twohig, who adds that mobile still has challenges, such as inconsistent ad serving, that deter some clients.Ramsey sees more brands—particularly retailers—using mobile as a medium to launch their own apps rather than run a lot of ads in the near future.Speaking of apps, what about the red-hot location-based app sector, which is dominated by Foursquare? Ramsey notes that Foursquare currently has only 3 million unique users, versus hundreds of millions for Facebook. “I have serious reservations about how [location-based apps] are going to grow,” he says. “And regardless, Facebook wins every way.”

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Media Outlook 2011: Digital

Mike Shields

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Mike Shields