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Ad spending trends to watch in 2016

Date: December 22, 2015

Get used to the term digital deflation.

Get used to the term digital deflation.

It’s the phrase coined to describe the overall decline in ad dollars that occurs when budgets are shifted from traditional to new media.

Because digital is generally cheaper to buy than traditional media such as TV, magazines or radio, total dollars invested in the media economy also decline.

While this doesn’t necessarily reflect weakness in ad spending, it does mean it will be harder in coming years to post year-to-year gains in advertising dollars, given the rate at which money is being switched from traditional to new media.

Digital deflation is behind, in part, the rather tepid forecasts for 2016 ad spending that came out this week. Most hover around 3-3.5 percent, despite forecasters’ assertions that the media economy is healthy.

“As media usage and ad dollars gradually migrate from traditional media to digital media and since digital media now represent on average a third of ad budgets, the overall budgets are stagnating and, in some spending categories, shrinking,” notes Magna Global, which issued a forecast for 3.3 percent growth next year, minus Olympic and political spending.

Magna says it’s not just digital that’s bringing down pricing, however. Some traditional media have also had to lower asking prices in order to compete with new media, leading to further deflation.

Digital deflation is one major trend that emerged from the round of forecasts.

Here are some others to be keeping an eye on in the coming year:

No stabilization for print

At some point the losses for newspapers and magazines will stabilize but 2016 won’t be the year.

Predictions range from declines in the mid-single digits to the mid-teens, with forecasters pointing to the rise of mobile devices especially to blame for print’s continued struggles.

More growth for out of home
Out of home straddles the divide between traditional and digital media nicely, with digital screens giving the medium a nice boost.

All forecasters foresee a continued period of growth for OOH. As ZenithOptimedia points out, there’s great promise in using big data to target people, and that will continue to spark growth.

Soaring mobile but not outpacing desktops
Mobile will overtake desktop in the near future. That won’t be next year, however.

The slight majority of digital spending will go to desktop. Of note, digital video dollars are overwhelmingly spent on desktop and will be for at least another three years.

Struggles for local media
Local advertising is usually slow to come back following a recession, as it takes longer for small businesses to recover than big ones.

But while we’re well into the recovery from the last recession, local continues to lag and will see spending decreases over the next few years, as advertisers continue to shift money to digital.

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