Social media advertising continues to gallop forward, spurred on in part by smartphone use, and soon will overtake newspaper advertising.
Global social media advertising expenditures have more than doubled over the past two years, reaching an estimated $16 billion in 2016, up from $7 billion in 2014, according to data from Magna Global presented at the UBS Global Media and Communications Conference on Monday. Advertising firms GroupM and Zenith Optimedia joined Magna Global in presenting their annual advertising sales forecasts.
"This year was the year for social media," said Vincent Letang, Magna Global's executive vice president for global market intelligence, who was joined by GroupM futures director Adam Smith and Vittorio Bonori, global brand president at Zenith Optimedia, at the New York conference.
Digital ad spending will "take the lead" in market share by 2017, which reaffirms Magna Global's previous forecasts of a digital takeover, Letang said.
Total digital ad spending grew 17% year-over-year in 2016, while traditional, offline mediums such as print, radio and television advertising saw nearly flat growth compared with the previous year.
Mobile will generate an estimated 52% of digital sales in 2017, thanks in part to platforms such as Facebook (FB) - Get Facebook, Inc. Class A Report and Alphabet's (GOOGL) - Get Alphabet Inc. Class A Report Google that have become major advertising channels, particularly through video.
Facebook and Google are likely to dominate digital advertising sales for the next two to three years, Bonori explained.
Zenith also predicted that social media advertising will nearly match, and soon overtake, legacy newspaper advertising in the next several years. Social media advertising is growing by 20% each year and by 2019 will be 1% less than newspaper advertising.
Social media ad spending should be "comfortably ahead" of newspaper advertising by 2020, driven by consumers using social media as their "main source of news," Zenith said.
"Social media ads blend seamlessly into the news feed, and are much more effective than interruptive banner formats, especially on mobile devices," the firm added in a release.
Online video advertising, which has an annual growth rate of 18%, serves as a complement to television advertising, rather than a replacement, Zenith noted.
The television advertising market won't collapse, but it will lose market share as digital rises to the top in 2017, Magna Global noted.
Television ad spending grew 4% globally in 2016, largely due to cyclical events such as the Summer Olympics in Rio and the presidential election. As a result, the growth rate should slow to 3.6% globally in 2017, according to Magna Global.
Western Europe will see a modest decline in 2017 television ad spending due to political and economic uncertainties tied to Brexit and general elections in Germany and France.
In all, global ad spending will see a "pretty noticeable slowdown" to a growth rate of 3.6% in 2017, down from 5.7% in 2016, primarily as a result of political and economic uncertainties, Magna Global noted.