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Report: Digital ad spend growth slowed in 2016; Snapchat overtook Pinterest
Retail and consumer electronics pulled back from digital in favor of TV in Q4, according to Standard Media Index.
It appears that digital’s up-and-to-the-right trajectory of the past several years hit a bit of a lull in 2016. According to a report by advertising intelligence firm Standard Media Index (SMI), spending growth on digital advertising slowed to 13.3 percent year over year, compared to the sharp 26.2 percent growth seen in 2015 over 2014. From 2012 to 2015, digital has had a 19 percent compound annual growth rate. The fourth quarter of 2016 saw growth of just 7.1 percent compared to the previous year.
The two behemoths, Google and Facebook, account for some 76 percent of new investment in digital advertising, according to the Internet Trends Report by Mary Meeker of Kleiner Perkins Caufield & Byers. Take them out of the mix, and the growth rate was just 8.7 percent year over year. Ad spend on Facebook rose 83 percent from 2015. Google saw 16.6 percent growth.
Among the second-tier networks, Snapchat stood out in 2016, with ad spend growing 356 percent year over year. Snapchat surpassed Pinterest, which had seen 8 percent higher ad spend than Snapchat in 2015. In 2016, spend volume was 167 percent greater on Snapchat than Pinterest. Pinterest saw spend volume grow 58.2 percent year over year.
The sectors that drove Snapchat growth were food, produce and dairy; quick-service restaurants; TV networks; telecommunications; and consumer electronics, according to SMI.
As digital growth tempered, SMI found several brands put more into TV in 2016, which saw both the summer Olympics and presidential election. Q4, in particular, saw brands shift back from to TV from digital. After cutting TV spend in 2015, Paramount Pictures, Target and Progressive Insurance were among the large brand advertisers that increased TV ad spend in 2016.
Telecommunications and department stores both pulled back substantially from digital in 2016, while consumer electronics saw just .6 percent growth in digital ad spend in 2016. In Q4, the key holiday quarter, consumer electronics spend in digital fell by 23.4 percent, and department store spend declined by 7.8 percent.
“The big story in Q4 was the move back to Television for some big categories of advertisers who had pushed the experimentation with digital a little too far. Retailers flooded back into TV over the holidays which helped make up for some softness in the early part of the football season,” said James Fennessy, SMI’s CEO, in a statement.
Sectors that did see digital spend growth in 2016 were movie studios (up 40 percent); food, produce and dairy (up 36.5 percent); alcoholic beverages (up 33 percent); and prescription medications (up 26.7 percent).
SMI says its data accounts for roughly 80 percent of all ad spend among the major agency holding companies by sourcing directly from the media-buying firms.