Digital Fuels Ad Spending Growth in 2012: MagnaGlobal

Posted on by Brian Quinton

While it'll be hard to characterize advertising spending as full speed ahead in 2012, at the very least it won't be moving in reverse. U.S. advertising revenue for media owners is forecast as increasing from a projected $173.54 billion in 2011 to $178.50 billion in 2012, according to new research by MagnaGlobal.

Around $3.10 billion of that will be generated from election year expenditures as well as spending spurred by the Olympics. But back those out and spending still ticks up 1.4%, to $175.40 billion.

Within direct channels, next year's rise should occur even with the drag of direct mail expenditures, which are seen as dropping by 1.4% to $20.48 billion in 2012 from $20.78 billion. Granted, the idea of mail revenue slipping shouldn't come as a surprise.

"As advertisers become more sophisticated with targeting, they are more likely to use online [channels] rather than direct mail," says Alex Feldman, manager of global forecasting at MagnaGlobal. "Direct mail is in many ways a volume business. The biggest decrease in volume, if you look at the USPS, is in first class consumer business mail, which is going online. The volume that is increasing, consistent with economic trends, is from couponers such as Valpak."

If direct mail expenditures are trailing off, email spending is plummeting. National and local email spending amounted to $195 million in 2010, but is expected to fall to $125.1 million this year—and down to $82.8 million in 2012.

"The issues with email are privacy concerns, and that people are receiving too many emails," says Feldman. "There is a greater use of alternative communication methods, such as RSS feeds or Google Reader. Peoples' email inboxes are over-flooded, and the tendency is to delete them."

Aside from email, online spending continues to boom along. The current year should see $17.96 billion in direct online spending, up 19.8% from 2010's level. MagnaGlobal sees this growth continuing at an 11.8% rate, reaching $20.08 billion in 2012.

Emerging marketing channels will grow at rates that far outstrip those of more mature mediums. Mobile expenditures, which jumped from $423.5 million in 2010 to $685.6 million in 2011, are set to make another leap, to $922.8 million in 2012. And spending on online video, which stood at $1.40 billion in 2010, rose to $1.90 billion in 2011 and should hit $2.31 billion in 2012.

"If you compare online video and mobile, you would say online video took off in 2008 and mobile took off last year," says Vincent Letang, executive vice president and director of global forecasting for MagnaGlobal. "Online video was almost an instant hit from the moment broadcasters decided to put their video online – they reused their TV spots. It was a simple proposition.

"By contrast, mobile has been nascent, mostly because of fragmentation issues regarding operating systems and devices as well as formatting and distribution issues," Letang continues. "All of that is getting better now. There's more scale because there are so many smart phones, which wasn't the case three or four years ago."

Neither Letang or Feldman are concerned about recent, more dire economic forecasts possibly indicating a double-dip recession. MagnaGlobal's proprietary models focus largely on consumer expenditures, as well as industrial production, and they are comfortable with their predictions.

"We have looked at what economists currently forecast for personal consumption in 2012, and at the moment the consensus is in favor of slow growth," says Letang. "This is even though, according to some surveys of economists, 20% to 30% expect a double dip. But they are not the majority."


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