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February 17, 2012
Estimates of the size of the Digital Place-Based Advertising (DPA) market vary greatly, as do growth forecasts. This variation is due to many factors including the immaturity of the industry, a lack of accepted measurement standards, and differing industry definitions. Thus, as the information below illustrates, even the most respected firms are navigating in somewhat uncharted waters.
Consider that PQ Media, in its Global Digital Out-of-Home Media Forecast 2011-2115, for example, estimates the global digital place-based advertising industry at $5.06 billion, and the U.S. market at $1.54 billion in 2010. Kinetic, in its 2011 Global Digital Out of Home Handbook, pegs the global market at around $3.3 billion, and the U.S. market at $1.1 billion (see Chart 1). MagnaGlobal, in its 2011 Advertising Forecast, advanced that the global market was $2.1 billion in 2010 (see Chart 2).
Chart 1.
Source: Kinetic
Chart 2.
Source: MagnaGlobal
Perhaps a more informative question would be: what is the pace of growth for the U.S. DPA market, and is this a reliable trend indicator for 2012? As a starting point, we have found only one qualified firm that has advanced growth projections. PQ Media found that the U.S. digital place-based advertising industry grew by 15.0 percent in 2010, and expected 16.0 percent growth in 2011.
How realistic is 15-16 percent growth in the DPA market for 2012? Hard to say, of course. But in considering this, we believe that the advertising industry itself offers a strong directional indication as to where the DPA market is heading. The following two reasons form the basis for our opinion:
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The ad industry is well established.
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The big five agencies, which account for more than 30 percent of industry spend, are public. Thus, their revenue performance is a good indicator of overall ad industry spending.
MagnaGlobal estimates that the U.S. advertising market grew by 2.9 percent in 2011, and looks for 3.7 percent growth in 2012. And according to MagnaGlobal, “the U.S. advertising market is still 13 percent smaller than what it was in 2007 ($168.7 billion).”
According to PwC’s Global Entertainment and Media Outlook 2011–2015, advertising spending in North America grew by 5.5 percent in 2010, and is projected to grow by 4.2 percent during 2011-2015 (see Chart 3).
Chart 3.
Out-of-home, where DPA tends to get positioned, is projected to grow 5.5 percent during 2011-2015 (see Chart 4).
Chart 4.
Another perspective comes from the 2012 RSW/US New Year Outlook Survey, which polls advertisers and agencies about their outlook. As the following Charts 5A and 5B illustrate, Agencies’ expectations (increase in 2012 by 55 percent) are ahead of those of their clients (increase in 2012 by 41 percent).
Charts 5 A&B.
5A. Agencies.
Source: RSW/US
5B. Clients.
Source: RSW/US
Considering that the advertising industry is on track to grow by 3.7-4.2 percent, and out-of-home is forecast at 5.5 percent, will the DPA market grow by 15-16 percent? Anything is possible when one considers that U.S. spending on mobile advertising is projected to grow by 80 percent in 2012 (see Chart 6). Guess it depends on who you ask.
Chart 6.
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