Luxury fashion brands like Gucci and Louis Vuitton — traditionally big magazine advertisers — are starting to shift more and more ad dollars to digital channels, according to The Wall Street Journal.
Globally, the luxury industry spent over $1 billion on digital ads in 2016, a 63% increase since 2013, while spending on magazines declined 8% over the same period, per Zenith.
As ad spending on print continues to decline, magazines viewed luxury fashion as one the last dependable categories for ad revenue, but it seems the tides are shifting as digital becomes the main way people consume content. Here are a few more observations:
- Print still represents the majority of ad spend for high-end luxury brands. High-end luxury goods companies selling watches, jewelry and couture fashion spent 73% of budgets on print ads in 2016, and Zenith expects that to decline modestly to 72% this year. However, the more accessible “broad luxury” category, which includes cars, cosmetics, and perfumes, already spend 30% of budgets on digital channels, and that’s set to increase steadily over the next few years.
- Brands save money with social media exposure. Luxury brands not only reach mass audiences more cheaply on digital versus print, they can also spread brand messages organically through social media accounts. Marketing firm Tribe Dynamics created a metric called “Earned Media Value,” (EMV) which estimates how much brands save through organic social media posts. The average EMV for the top 10 luxury brands, in terms of amount saved, was $33 million in March 2017, 33% increase over last year.
- Publishers have an opportunity to create more fashion-oriented content to capitalize on the shift. Although brands can certainly save money by pushing organic posts, they can also capitalize on other fashion-oriented blogs. This means that publishers have an opportunity to create more fashion content in the form of online editorials and videos as ad dollars shift to online channels.
- Topic-specific sites surface better on social media and support revenue-diversification. Social media sites benefit category-specific sites over general interest ones. In addition, fashion-oriented digital properties create an e-commerce opportunity for ad-dependent publishers.
Consumers continue to increase their time spent consuming digital media, while advertisers continue to increase their ad budgets into digital channels.
The influx is not expected to let up in the near future. The US digital advertising industry will continue to experience remarkable growth through 2021 to reach nearly $100 billion in annual revenue, driven primarily by the sustained migration of ad dollars from traditional TV to digital video and the continued increase of social spending.
Overall, the strong growth of the US digital ad market can largely be attributed to increased time spent by consumers on digital media and brands’ increased comfort with allocating budgets to digital formats, particularly on digital video. In a recent 2016 survey of almost 400 US ad agencies and marketers, the IAB found that two-thirds of respondents plan on increasing spending on digital video in the next year.
Moreover, mobile will become the top destination for digital ad spending as advertisers continue to attempt to resolve the disconnect between the rapid growth in time spent on phones and tablets and the relatively small share of ad budgets that are allocated to such platforms — known as the mobile opportunity gap. In fact, mobile is set to eclipse desktop ad spend by 2018.
Dylan Mortensen, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on U.S. digital media ad revenue that forecasts revenue trends over the next five years and outlines the key growth drivers for overall digital ad revenue in the U.S.
Here are some key points from the report:
- US digital ad revenue is expected to reach nearly $100 billion by 2021, according to BI Intelligence estimates. This represents compound annual growth of 8% from the $68.9 billion expected in 2016.
- Mobile is positioned to become the top destination for digital ad spending as advertisers continue to attempt to close the “mobile opportunity gap.”
- Digital video advertising will grow faster than any other segment over the next five years, as consumers shift time spent online to phones and tablets. Revenue in this category is forecast to rise from $8.5 billion in 2016 to $23 billion in 2021.
- Social advertising in all formats is gaining traction and will be among the key drivers of digital ad growth in the next five years. Social ad revenue is poised to climb to $30.8 billion by 2021, up from $15.5 billion this year.
- Artificial intelligence, augmented and virtual reality, and sponsored content will help propel further digital ad growth in the next decade.
In full, the report:
- Forecasts US digital ad revenue through 2021.
- Highlights the rising popularity of digital media with consumers and brands.
- Explores why digital video advertising growth will exceed all other formats over the next five years.
- Outlines emerging technologies that will help propel ad growth in the next decade.
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