Alternative Advertising To Lead Five Year Communications Growth
A new Veronis Suhler Stevenson Communications Industry History And Forecast Study and Executive Summary shows that total communications spending rose 6.8 percent in 2006 to $885.20 billion, driven by the accelerating shift to alternative media platforms and strong gains in the marketing services and institutional sectors.
Overall spending climbed at a compound annual growth rate of 5.9 percent from 2001 to 2006, exceeding GDP growth in all but one year, as the consumer end user sector drove growth early in the period.
Spending on communications is expected to grow, says the report, 6.4 percent in 2007 to $941.71 billion, and post a CAGR of 6.7 percent from 2006 to 2011, and is expected to exceed $1 trillion by 2008 and reach $1.222 trillion in 2011. Growth will be driven by the expansion of traditional media companies in Internet and mobile applications, and strong growth in alternative media platforms as marketers pursue channels that reach target audiences more effectively, deliver measurable return-on-investment, and are highly engaging to consumers.
Communications will be the third fastest growing of the 15 economic sectors during period from 2007 through 2011, trailing only the agriculture, forestry & fishing and federal sectors. Spending on communications is expected to remain the fourth largest economic sector during the forecast period, lagging behind the services, finance, insurance & real estate, and state & local sectors.
Institutional end-user spending, such as business-to-business magazine circulation and trade shows, was the fastest-growing communications sector in 2006, rising 8.1 percent in 2006 to $226.90 billion, mainly as a result of strong growth in business information services, including marketing, financial & economic information, and television programming costs.
Marketing services, such as direct marketing and promotions, was the largest communications sector in 2006, climbing 7.7 percent to $254.01 billion. Double-digit increases in custom publishing, branded entertainment and public relations were the primary drivers of growth, as brand marketers employed media that reach target audiences more efficiently.
Consumer end-user spending on communications increased 5.1 percent in 2006 to $194.55 billion, as consumers continued to migrate to broadband access, a raft of hit movies reversed declines in the box office and home video markets, and the release of new console platforms spurred videogame spending growth.
Advertising spending, such as broadcast television and newspapers, grew 5.7 percent in 2006 to $209.74 billion, driven by spending on alternative advertising, such as online, mobile, and alternative out-of-home, which exhibited double-digit gains. Traditional advertising spending experienced low single-digit growth, even with the benefit of political and Olympics advertising.
For the first time in a decade, consumers spent less time with media, as usage per person per year dropped 0.5 percent to 3,530 hours after posting decelerating growth during the previous two years. The decline can be attributed to consumer migration to digital sources of information and entertainment, which require less time than their traditional media counterparts. Meanwhile, time spent with institutional media rose 3.2 percent to 260 hours per employee per year, propelled by strong gains in business usage of digital platforms.
Forecast Communications Spending, 2007-2011 ($ millions)
Five year change
Five year change
Compound Annual Growth
Professional & Business Information Services
Cable, Satellite & RBOC Television Services
Pure-Play Internet & Mobile Services
Educational & Training Media & Services
Source: Veronis Suhler Stevenson communications industry forecast / Executive Summary, August 2007
The shift toward alternative media will continue unabated during the forecast period, continues the Report Summary. Total spending on communications is expected to increase 6.4 percent in 2007, decelerating from the 6.8 percent gain in 2006. Spending is projected to climb at a 6.7 percent CAGR from 2006 to 2011, slightly higher than one percentage point over nominal GDP, driven by strong gains in marketing services and institutional end-user spending.
Alternative advertising and marketing will continue to spur growth in the communications industry during the forecast period, expected to reach $122.03 billion, according to exclusive PQ Media research. In contrast, spending on traditional marketing is expected to rise at a 4.8 percent CAGR during the 2006-2011 period to $243.38 billion. In actual dollars, however, alternative marketing will increase $60.37 billion compared with a $51.04 billion gain for traditional marketing.
Alternative advertising is expected to soar by $48.55 billion from 2006 to 2011 to $75.08 billion, a CAGR increase of 23.1 percent, while traditional advertising will inch up $12.40 billion in comparison to $195.61 billion during the forecast period, a compound annual growth rate of only 1.3 percent
Institutional end-user spending is expected to remain the fastest-growing communications sector during the 2006-2011 period, rising at a 7.6 percent CAGR, while marketing services will remain the largest sector of the communications industry during the forecast period, propelled by gains in branded entertainment, custom publishing and public relations.
Advertising spending is projected to become the slowest-growing sector at a 5.2 percent CAGR from 2006 to 2011, reaching to $270.69 billion, primarily due to gains in alternative advertising, such as online video and videogame advertising, as well as the influx of ad spend from the Olympics and election campaigns in 2008 and 2010. Consumer end-user spending will increase at a CAGR of 5.8 percent during the 2006-2011 period to $257.70 billion, as numerous consumer media reach penetration limits, such as cable, satellite & RBOC television services.
Entertainment media, branded entertainment, professional & business information services, cable, satellite & RBOC TV services, and direct marketing will generate more than $100 billion in spending by 2011, up from three in 2006. These five segments will account for more than 60 percent of the $355.07 billion gain in communications spending from 2006 to 2011
Internet & mobile services will become the fastest- growing segment, replacing outsourced custom publishing, soaring at an 14.7 percent CAGR from 2006 to 2011
Print media, such as newspapers, yellow pages, and consumer magazines, are expected to experience sluggish growth during the forecast period and be the slowest-growing segments during 2006-2011.
The complete report is available through VSS here.