Advertising: it's all in the mix

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By Ennèl van Eeden and Casper Scheffer

Internet advertising and other advertising segments can, and will, coexist

Internet advertising to exceed all other ad revenue this year

The Dutch advertising market has surpassed the €3.5bn milestone in 2016 and is heading to the next financial milestone: €4bn. internet advertising revenues will surpass those derived from all other advertising streams combined in 2017. Specifically, internet ad spend will total €1.86bn by the end of the year compared to €3.66bn for the entire Dutch advertising market.  

Advertising expenditure has been shifting to online channels, in line with consumption habits over the last decade. Print products continue to lose market share, as consumers have come to read news and entertainment online and increasingly on mobile devices. At the same time, terrestrial TV seems to lose the battle against the rapid ascent of cloud-based subscription services such as Netflix and both free and paid-for content hosted on YouTube. Unsurprisingly, print, and to a lesser extent TV, advertising continue to suffer just as so far momentum in internet advertising growth shows no signs of abating.

Growth of CAGR 7.7% is forecast for internet advertising, versus 3.3% for ad spend as a whole. Traditional media will suffer the most from this transition, as newspaper publishing will show a declining CAGR of -6.1%, with consumer magazines not far behind with a CAGR of -3.7%. Thus far, radio and out of home advertising seem largely unaffected by the rise of internet advertising.

 

 

Total advertising market (€ millions)
Netherlands Historical data Forecast data CAGR %
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 17-21
Television 962 933 964 965 992 953 975 984 1,007 1,016 0.5%
y-o-y growth   -3.0% 3.3% 0.1% 2.8% -4.0% 2.3% 0.9% 2.3% 0.9%     
Radio 221 227 233 225 225 225 226 227 228 230 0.4%
y-o-y growth   0.7% 1.4% 0.8% 1.2% 1.4% 1.6% 1.8% 2.4% 2.9%     
Out-of-home 157 158 160 161 163 166 168 171 175 180 2.0%
y-o-y growth   0.7% 1.4% 0.8% 1.2% 1.4% 1.6% 1.8% 2.4% 2.9%  
Internet 1,160 1,255 1,397 1,513 1,683 1,856 2,029 2,188 2,325 2,434 7.7%
y-o-y growth   8.2% 11.3% 8.3% 11.2% 10.3% 9.3% 7.9% 6.3% 4.7%  
Consumer Magazines 443 412 391 372 356 341 327 315 304 295 -3.7%
y-o-y growth   -7.0% -5.2% -4.6% -4.4% -4.2% -4.0% -3.7% -3.5% -3.2%  
Newspaper 359 293 275 255 233 214 203 191 181 170 -6.1%
y-o-y growth   -18.4% -6.1% -7.3% -8.6% -8.2% -5.1% -5.9% -5.2% -6.1%  
Video Games 29 32 35 38 43 46 48 51 53 55 5.1%
y-o-y growth   10.7% 8.7% 8.1% 11.8% 6.8% 6.1% 5.2% 4.1% 3.4%     
Cinema 5 6 6 6 6 7 7 7 8 8 6.0%
y-o-y growth   4.0% 4.5% 4.6% 4.4% 7.9% 3.2% 6.7% 6.3% 5.9%  
Total 3,235 3,215 3,343 3,409 3,566 3,661 3,824 3,963 4,100 4,196 3.3%
y-o-y growth   -0.6% 4.0% 2.0% 4.6% 2.7% 4.5% 3.6% 3.4% 2.3%  

 

 

 

 

Video advertising shows explosive growth

Drilling down on internet advertising, paid search advertising claims the largest share, accounting for a projected 46% of total internet advertising revenues in 2017 (across both wired and mobile). Like businesses in other countries, Dutch companies continue to see value in paying to feature at the top of search results, a market that Google continues to dominate. Google phased in its Expanded Text Ads at the beginning of 2017, which provides more freedom and creativity for the advertiser, paving the way for future growth.

While wired internet claims the most paid search ad revenue, its growth (CAGR 5.4%) is far behind that of mobile paid search ad sales (CAGR 22.3%), the single most rapidly growing area of advertising in the Netherlands.

Looking across both wired and mobile internet advertising it is video that is showing high growth as advertisers flock to position themselves in front of a growing mobile audience. The recent launch of Facebook Live illustrates that the end of the growth in video is not in sight. By 2019, revenues from mobile video advertising will overtake wired for the first time.

Taken together, wired and mobile video will be worth €230m by 2021 – meaning one in every ten euros spent on internet advertising in the Netherlands will be on internet video.

Audio based assistance to change the search segment

Within the global market ad tech giants like Google and Facebook, control ad spending. This is not so much different for the Netherlands where the largest part of internet advertising is dominated by Google’s AdWords. Google effectively controls the Dutch internet advertising business, with other parties holding small market shares. The same situation applies to social media advertising where Facebook holds a strong number one position.

The rise of intelligent personal assistants like Amazon Alexa, Microsoft Cortana, Google Home and Apple HomePod (Siri) can impact the near future as more and more consumers will be able to search without using a screen. The audio based searches, will impact display ads and put more emphasis on ‘top 3’ search results. 

Ad blocking threatens revenues

Ad blocking software remains a significant challenge for publishers and advertisers alike. An estimated 17% of the Dutch population use ad blockers, which puts it just below the Western European average of 20%, according to Page Fair.

On mobile only 2% of the Dutch population use such apps according to the most recent measurements. However, usage is rising as consumers become aware of the software which is available since 2015.

 

 

 

 

Can Internet advertising live up to the promise?

In recent years, the speed of developments in the internet advertising industry has exceeded the speed in all other industries, resulting in large successes. However, the frequency at which CEOs of the largest advertisers question and challenge the effectiveness of internet advertising shows that there is still room for alternatives. Clearly, internet advertising is not a magic sauce which marketers can blindly use to generate the return that is expected from them. On the one hand, marketers need to closely monitor and improve the effectiveness of internet advertising. On the other hand, they should remain open-minded toward other ways of advertising.

Internet and other advertising segments can, and will, coexist, but the others do need to show they keep improving their added value. One example of an area for development is TV advertising. We expect that parties across the TV value chain will jointly increase their investments in internet-like advertising technologies. 

Contact us

Ennèl van Eeden
Global Entertainment & Media Industry Leader
Tel: +31 (0)88 792 45 40
Email

Casper Scheffer
Partner, PwC Netherlands
Tel: +31 (0)88 792 65 20
Email

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