Multi-channel world: Can publishers compete for the half of ad spend that’s digital?

As the UK ad market tips into 50 percent digital spending for the first time, publishers are having to adjust their platform strategy to take advantage of that shift. Because one thing’s clear – it’s leaving print, and UK newspaper publishers aren’t yet seeing enough from digital to make up for it.

The latest This Year, Next Year report from Group M predicts total advertising spend will reach £15.7 billion in 2015. Included in that rise is a 12.7 percent increase in the amount expected to go to digital sources, taking it to over £8 billion. Group M futures director Adam Smith says news groups are likely to benefit from that increased digital spend:

“We estimate that 10 per cent of newsbrand revenue is digital in 2014. Advertiser demand for online display is rising strongly.»

However, that demand is being outstripped by the overall decrease in ad spend on national newspaper brands as money leaves print. Group M estimates that overall ad spend on national newspapers will fall nine percent this year and eight percent next year, noting that in 2014 £92 million had already jumped ship to television or radio advertising.

It’s also worth considering the relatively low revenue per user for digital platforms, which the national newspapers are seeing an increasing proportion of their content consumed on. The Group M report uses NRS PADD figures to show the breakdown of print vs. digital consumption as follows:

 

 

So even if newspapers can take solace in increased ad spend where they’re seeing increasing proportions of their audience, the relatively low value per head of that audience means they’ll struggle to command as much from digital advertisers as they ever did on print.

Where is the spend coming from?

The fact that digital platforms are content agnostic, in that they can publish text, video and audio content with ease, means that saying ‘digital ad spend’ isn’t hugely useful from an analytic point of view. Lumping revenue from banner ads in with pre-roll and interstitial ads makes for an impressive overall figure, but how does each type of ad break down when it comes to spending?

Group M evidently sees the majority of that ad spend coming from video, social and mobile, with Smith arguing that publishers of all types of content need to transition into those areas:

«Video, social and mobile are the main drivers. Newsbrands must therefore align with these as best they can.»

That’s backed up by predictions from market forecaster ZenithOptimax, who are reported in The Drum as saying: say:

«Social media display was forecast to grow at an average of almost a third (29.9 per cent) each year during 2013 and 2016 as a result of continued mobile usership growth, while online video advertising will expand by almost a quarter (24.2 per cent) during the same period.»

That’s potentially good news for publishers like Trinity Mirror, who haveinvested a huge amount in its online video production, with its associate digital sales director Shaun Jordan also stating that the company now considers itself mobile first, since they’re well positioned to catch the wave of that ad spend. But that doesn’t ameliorate the rapidly shrinking print ad spend on which those publishers are still largely dependent.

 

 

Consumer magazine concerns

Things are gloomier still for consumer magazines. Smith’s research claims that only 10 percent of luxury ads, the very valuable ones that have helped lifestyle magazines like Vogue outperform the rest of the consumer market, are online, because:

«Venturing onto the wider web – even parts belonging to trusted magazines – is another matter. This involves more test-and-learn, and luxury brands see more risk in this than most.

«Publishers may reassure, but advertisers remain sceptical.»

Group M is also notably down on brand and native advertising, which it says currently isn’t gaining traction when it comes to total ad spend. Instead, display ads are still the primary source of growth for the UK ad space, which is a problem for publishers hoping to transfer brand advertising, as opposed to direct response based on clicks and other more easily measurable forms:»Brand advertising is a slower burn as it puts more at stake and success is harder to account. The IAB says brand advertising still accounts for only 17 percent of UK online advertising.

«Display has however been the main source of UK digital ad growth since 2013, and we see this lead growing wider in 2015. There is plenty of structural headroom.»

Broader competition

So while Group M’s figures show the UK ahead of the rest of the world in moving to digital, UK publishers are still heavily dependent on their falling print revenue despite their audience migrating online.

The transition to digital, and indeed the way Group M measures it, highlights a broader problem for publishers. Non-digital spend has been categorised by publisher type, but in digital advertising it is categorised by channels – social, video, etc, of which the content produced by publishers is normally a small part.

They’re no longer a team competing in the Premier League – they’re competing with teams not just from other leagues, but entirely different sports, for the same audience.

So while the overall proportion of digital ad spend is increasing, publishers are competing in a much bigger pool in each channel. They need to make sure they’re investing in the right places to take advantage of that growing pot of ad spend, but being the most attractive place to advertise is far, far harder.

 

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