Queen of the Internet Mary Meeker publishes a Time Spent vs Ad Spending chart every year.
I believe that it’s a very insightful analysis and says a lot about how the industry is moving ahead.
In my opinion, three factors contribute to the gap between Time Spent and Ad Spending.
- Ad effectiveness: Clearly, the effectiveness of advertising is different by media. It might be different according to the type of advertiser as well. Digital media clearly took advantage of the recent ad-tech boom and significantly increased ad effectiveness via better measurement, targeting, and attribution solutions.
- Media owner concentration: If the number of media owners is small, they tend to control the price. Google and Facebook have much higher market shares in the digital media space than TV networks do in traditional media. I will write about this topic in my next blog post.
- Rapid change in time spent in recent years: Typically, ad spending changes after time spent shifts. There is some time lag, as the entire industry has to catch up to the trend. If the change in time spent happens very quickly, it creates a bigger gap between time spent and ad spending.
I have carried out the same analysis using eMarketer’s data. I’m not sure why the ad spending number is very different from Mary Meeker’s analysis. Based on my analysis, both TV and digital had very low ad spending back in 2008. In the last 10 years, both of them were able to reach their fair amount of ad spending. Other media outlets (e.g., newspaper, OOH, magazine) are quickly losing their shares.
If we focus just on TV, the trend looks quite interesting. Until 2015, while time spent decreased quite a bit, ad spending increased significantly. My hypothesis is that this was driven mainly by the improvement of the ad effectiveness of TV commercials. However, after 2016, the learning curve started to saturate. Ad spending decreased at the same pace as time spent. Based on this analysis, most likely TV’s ad spending % will continue to shrink at the same pace as the time spent %.
Although digital’s ad spending and time spent are pretty much the same, when we look within digital, we see a very different picture. Mobile’s ad spending % is actually much higher than time spent %. The time spent of other connected devices (e.g., Roku, Chromecast) is much higher than ad spending. Logically, mobile ad spending growth should slow down quite a bit. The ad spending of other connected devices should grow much faster. The time spent of desktop will gradually shrink to the level that matches the ad spending of desktop.
Why is the gap for mobile so big? The peak of mobile time spent growth happened around 2013. After that, the growth rate of mobile slowed down quite a bit, though ad spending has been growing at a very high pace. In addition, mobile ads are controlled by a few tech giants that are capable of artificially increasing the price point.
Other connected devices are in the completely opposite situation. The growth of time spent has been accelerating. However, most of the brands are still only doing the pilots. Ad spending is significantly lagging behind time spent. The supply-side market is much more fragmented as well.
Based on this analysis, I predict the growth of mobile ad spent will plateau very soon. It also gives me reason to believe the golden age of OTT/CTV is coming.