Digital advertising spending growth slowed in Standard Media Index’s (SMI) results for 2016, reflecting a slowing ad market and questions from advertisers on its effectiveness. SMI’s digital ad spending data shows growth of 13.3 percent in 2016, compared to 26.2 percent the year before. Total 2016 ad spending grew 6.8 percent, easing 0.8 percent from 2015.
“Brands today are marketing in a digital world and we have seen the rapid growth in the sector in the past several years,” says James Fennessy, CEO of SMI. “With that being said, the trajectory of digital spend has recently hit a major speed bump as brands question the efficacy of the medium. The big story we saw in Q4 was a re-commitment to television for a number of big categories of advertisers. Retail, telcos and consumer electronics have not seen the outcomes they expected from digital and have moved back to the medium they have trusted for decades. Retailers, in particular, flooded back to TV over the holiday period after moving way too much to digital in 2015.”
The slowdown in digital advertising—down 50 percent from 2015—was evident throughout the year, with the fourth quarter turning in a 7.1-percent digital growth year-over-year. SMI’s data found the trend most apparent among retail and telecommunications companies. Digital remained popular with some sectors in 2016, however. Movie studios increased their spending by 40 percent in 2016, while food, produce and dairy increased digital spending by 36.5 percent, alcoholic beverages by 33 percent and prescriptions by 26.7 percent.
For the television market, 2016 brought an overall 4.4-percent increase in ad spending, with broadcast and cable seeing increases of 4.6 percent and four percent, respectively. SMI’s data highlighted the value of sports to television’s bottom line; removing sports, the television ad market grew by only 1.4 percent in 2016—cable up 3.9 percent and broadcast declining 2.4 percent. With 2016 being both an Olympic and an election year, sports programming grew by 16 percent and news by 14.1 percent. Ad spending on entertainment programming slipped 1.8 percent.
Looking at other categories in SMI’s data, magazine ad spending contracted 9.1 percent in 2016, newspapers were down 13.9 percent and radio declined 0.5 percent. Out-of-home advertising, however, grew 6.9 percent in 2016.