FTI Consulting forecasts US online ad spending to hit $123 billion

Digital media is set to capture half of the entire US advertising market share within three years according to new analysis from FTI Consulting. Over the next 20 years digital’s share could rise to 80%, while online ad spending is set to reach $123 billion by 2021.

Though the meteoric rise of digital advertising is no secret, one surprise is the sheer speed with which it has annexed the market share of rival media. Findings from the 2018 Advertising Forecast produced by FTI Consulting’s Telecom, Media & Technology (TMT) practice indicate digital’s momentum will continue well into the coming decades.

“The market-share gain in digital advertising in recent years has been unprecedented and has far outstripped the share gains experienced by TV or cable after their introductions in the 1950s and 1970s, respectively,” said Christopher T. Nicholls, a Senior Managing Director at the advisory firm’s TMT practice.

“Digital advertising has a 36% market share today, and, with ads for mobile devices and mobile video growing at a rate of 17% to 20% per year, we expect continued gains for the foreseeable future.”

This market share of just over a third is projected to increase to almost half (49%) by 2021. The casualties of digital’s march forward will be the same – television, radio, newspapers, magazines and direct mail – and face an even heavier onslaught as spending on online ads soars from $84.2 billion in 2016, to $122.9 billion in 2021.

“Digital growth has been unrelenting, as much as 20% in recent years, driven by mobile search, social and video,” added Luke Schaeffer, Global Leader of the TMT practice at FTI Consulting. “One only has to look at the extraordinary reach, user engagement and scale of the largest digital media platforms in the United States – Facebook, Apple, Amazon, Netflix and Google, known as the ‘FAANGs’.”

Facebook and Google control a combined share approaching 70% of the US digital advertising market. Globally, recent analysis from media investment giant GroupM forecasts that, with the exception of China, the twin titans would accrue 84% of global spending on digital advertising.

Other than the ongoing scandal over social media ad placement and Facebook’s treatment of user data and privacy, the only real threat to their dominance comes from Amazon – which reeled in more than $2 billion in digital ad revenue last year and has entered the living room of millions of Americans with a deal to live stream Thursday Night Football.

"Ad dollars are following eyeballs into the mobile digital ecosystem"
_{– Christopher T. Nicholls}

With the rise of smart TVs and decline of traditional television – especially among millennials – painting an accurate picture of what media Americans consume, and in what quantities, is a much harder affair than it was in the Golden Age of television and radio.

What is clear is that the total volume of media consumption has increased considerably – from an average of just over nine hours per day in 2015 to 10.75 in 2017 according to FTI’s report. People absorbing mobile content while watching, reading, and listening to other media is the chief driver of this upsurge.

“One of the most interesting aspects of the ad forecast is the role of smartphones,” said Nicholls. “Consumers are spending as many as three hours a day on social media sites, and ad dollars are following eyeballs into the mobile digital ecosystem. Most consumers spend more time using social media and watching video entertainment on their phones than talking or texting.”

With the average American spending almost half their day downloading some form of media, FTI predicts that the growth of digital will slow down organically after 2021. Digital’s impact on the wider advertising market is expected to evolve in different ways.

While it will increase its market share to as much as 80% by 2040, this growth will not force a significant contraction in the total ad market. What Nicholls and Schaeffer describe as the “digital cannibalization effect” has fallen from a 2% industry contraction per 1% growth in digital ad share in 2015, to just 0.6% today.