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

16 May 2018 Consulting.us

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.

FTI Consulting projects US online ad spending to reach $123 billion“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.


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Accenture Interactive acquires ad agency Droga5

08 April 2019 Consulting.us

In its latest push into the creative sector, global consultancy Accenture’s digital arm, Accenture Interactive, has acquired international ad agency Droga5. Droga5 brings with it a bushel of titanic clients such as HBO, Under Armour, Amazon, The New York Times, and Covergirl.

Per the deal, all 500 of the Droga5’s employees, who are spread across offices in London and New York, will become part of Accenture Interactive’s $8.5 billion organization, which specializes in customer experience and marketing services. Droga5’s leadership will remain in place. “[Founder Brian] Droga will remain in his role as creative chairman of Droga5, Sarah Thompson will continue as global CEO and Bill Scott will remain as UK CEO, working alongside the rest of the agency’s management team,” according to a press release regarding the acquisition.

It was reported in 2013 that talent agency WME had acquired a 49% stake in Droga5 in a deal valued at $115 million. There is no news of WME’s plans, but rumors swirl of the agency’s exit, most likely through IPO.

Brian Whipple and David Droga“We have bits and pieces of brand creative here in North America, but we didn’t have the best of the best” Brian Whipple, Accenture Interactive CEO, said in an interview with tech publication Fast Company. “David and his team are the best, hands down, and now we’ll be adding that, which will just make our ability to make best-in-class experiences for clients – and communicate them to consumers – an incredible reality.”

The move is undoubtedly as bold as it is aggressive, and comes hot on the heels of two rather major acquisitions, each part of an M&A strategy that has seen Accenture Interactive, the world’s largest digital marketing agency by revenue, close more than 20 deals globally in the past few years. In mid-March, for example, the firm purchased Dutch marketing agency Storm Digital. Then came news of its acquisition of Hjaltelin Stahl, a leading Danish creative agency known for creating unique and consistent cross-media experiences.

Accenture Interactive and Droga5 were each named one of Fast Company’s 2019 Most Innovative Companies in Advertising, the release states. “Accenture was recognized for ‘leading the merger of strategic consulting, ad-tech, and creative work’ while Droga5 was lauded for its offbeat and transformative ad campaigns.” The firm recently made headlines (and social media waves) for its “Game of Thrones”-style Bud Light commercial, which aired during the Super Bowl. 

The deal was announced Wednesday, but terms are not yet disclosed. The acquisition has been ongoing for a year and is expected to close by the end of May, according to The New York Times. Both Droga and Whipple said maintaining Droga5’s culture was of utmost importance, and said there would not be any major staffing or office changes because of the deal.

“Since day one, we have worked hard to push our industry forward and, hopefully, make a positive impact for all,” Droga said in the release. “The world of advertising is changing, and we are excited for this incredible opportunity with a company that will add more dimension to our best ideas and push us beyond our existing ambitions. The proposition we can bring to market with Accenture Interactive will transform the industry.”

Further expanding the firm’s front-end innovation capabilities, and its ability to help clients reinvent themselves with experimentation-led approaches, Accenture in early March revealed it acquired UK-based innovation firm ?What If!