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 |
| 2007 | 2008 | 2009 | 2010 | 2011 | 2001-2006 | 2006-2011 | CAG |
Professional & Business Information
Services |
| 146,975 | 158,204 | 170,331 | 183,462 | 197,360 | 39,181 | 60,838 | 7.6 |
Cable, Satellite & RBOC Television Services |
| 132,127 | 143,484 | 154,075 | 165,014 | 175,011 | 48,865 | 53,631 | 7.6 |
Direct Marketing |
| 107,682 | 114,425 | 121,832 | 129,698 | 137,807 | 27,260 | 36,302 | 6.3 |
Entertainment Media |
| 87,675 | 93,527 | 97,664 | 102,898 | 107,967 | 14,700 | 24,023 | 5.2 |
Newspaper
Publishing |
| 67,212 | 68,170 | 69,079 | 70,206 | 71,318 | 5,786 | 4,495 | 1.3 |
Branded Entertainment |
| 60,841 | 70,344 | 79,731 | 90,763 | 101,438 | 25,065 | 48,572 | 13.9 |
Broadcast Television |
| 49,056 | 53,688 | 53,359 | 57,313 | 57,060 | 9,990 | 7,916 | 3.0 |
Business-to-Business Promotion |
| 46,419 | 48,269 | 50,308 | 52,485 | 54,628 | 6,602 | 9,865 | 4.1 |
Consumer Promotion |
| 45,965 | 47,832 | 49,897 | 52,092 | 54,416 | 6,290 | 10,165 | 4.2 |
Pure-Play Internet
& Mobile Services |
| 36,832 | 43,328 | 50,499 | 57,078 | 63,250 | 12,314 | 31,363 | 14.7 |
Educational & Training Media & Services |
| 32,636 | 35,337 | 38,246 | 41,230 | 44,227 | 6,705 | 14,377 | 8.2 |
Consumer Magazines |
| 24,517 | 25,155 | 25,826 | 26,530 | 27,234 | 2,842 | 3,278 | 2.6 |
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.