Ad Money Didn’t Waste Any Time Moving Online | American Funds

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Investment Insights: The Long View

October 2015

Digital Dollars: Ad Money Didn’t Waste Any Time Moving Online

“My expectation is that newer technologies and consumption habits are going to continue to disrupt many established players.”

— Tim Armour

Timothy D. Armour Portfolio Manager Los Angeles office 34 years of experience (as of 12/31/16)
Advertisers have flocked to the Internet and mobile as consumers change behavior
Source: IAB/PwC Internet Advertising Revenue Report, 2014 Full Year Results, April 2015, © PricewaterhouseCoopers LLP (PwC). Not for further use or distribution without the permission of PwC. The data for broadcast TV, cable TV and the Internet were adjusted for inflation.

The face of the world’s media market is changing. Advertising dollars are increasingly flowing from traditional ads to digital. Increased spending on mobile, social media and digital video propelled U.S. digital advertising revenue to $49.5 billion for the full year of 2014, a 16% increase over 2013.

Total U.S. digital ad revenue is expected to grow to about $82 billion in 2018, according to Business Insider Intelligence and the Interactive Advertising Bureau.

Digital advertising is becoming a dominant force in the global media advertising market. Newspaper advertising revenues are declining, while radio and magazine advertising are expected to increase slightly through 2018. Worldwide, digital advertising will reach about $250 billion by 2018, rivaling TV ad revenue, according to McKinsey & Company’s Global Media Report 2014. The report calls that possibility “a development perhaps unforeseen even 10 years ago.”

The chart shows how quickly advertisers moved to the Internet in the late 1990s and mobile this decade. Going forward, mobile is projected to be the fastest-growing advertising channel. Indeed, mobile advertising in the U.S. totaled $12.5 billion during 2014, a 76% increase from the prior year total of $7.1 billion. The huge growth of mobile ad spending is a result of advertisers “chasing eyeballs” as audiences migrate their media consumption to mobile devices.

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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.