More than 50 per cent of online advertising revenue is spent on advertising on social media, according to a new report by consulting firm Gartner.
Advertising spending on the internet is expected to reach $3.5tn by 2020, with the most popular social media networks including Facebook and Google leading the pack.
The report said the biggest opportunity lies in mobile advertising, which is expected rise from $1.4tn in 2016 to $2.2tn by 2021.
The Gartners report noted that mobile internet advertising is expected growth to reach 4.5 per cent annually by 2020 and 6.5pc by 2021, while TV ad spending is expected increase from $7bn to $8.3bn.
The report said mobile internet is likely to drive a $1bn growth in mobile ad spend, while mobile TV ad spend is expected grow from $2bn to nearly $5bn by 2021 and will more than double by 2021 to $15bn.
However, the study also warned that the internet’s growth will be slow in the short term and warned that “internet advertising will need to focus on growth over the medium term to drive sustained growth”.
The report also pointed to a shortage of content and added that, while Google has more than 10,000 pages on its Google+ social network, Facebook has 1.2m pages.
The new report, entitled “The Future of Advertising: How to Leverage the New Web and Mobile Ad Platforms”, said the “next wave of digital advertising will be driven by mobile platforms, which have an opportunity to increase ad revenue, but also to provide advertisers with an alternative to digital.”
Mobile platforms can leverage their user base to grow their audience and increase engagement on their platforms.
For example, a platform can build a video ad campaign with the intention of driving engagement on Facebook or Google+ to increase engagement and generate revenue,” it said.”
The next wave of advertising will depend on the platforms that are able to scale their user bases and engage their users on their services and platforms.
“Gartner also warned of the risks of digital ad platforms.”
Given the complexity of the digital ad market, digital ad platform risks include:1.
the impact of the changing economics of digital distribution;2.
the complexity and uncertainty of the content distribution model;3.
the fragmentation of the ad networks;4.
the uncertainty and unpredictability of the business models;5.
the risk of new business models that will disrupt existing businesses;6.
the potential for consolidation of the internet advertising market.
“Digital advertising will require an unprecedented level of integration between the ad services and digital platforms,” the report added.
“It is important to understand the risks associated with digital ad, both for advertisers and consumers.
Advertisers will need a range of solutions to effectively manage digital ad and to manage the growing user base.”
The report added that advertisers will also need to understand how to leverage the new media environment to build a successful business model and that they should also have a holistic view of their digital platforms’ role in their business and the broader economy.
The study said, in order to succeed, companies will need “to adapt to an increasingly fragmented, fragmented marketplace that includes the mobile and internet platforms, as well as traditional media and ad services”.
“Digital platforms must leverage their customer base to drive increased engagement on social networks, to generate revenue on mobile platforms and to deliver advertising on mobile devices, and to build an integrated and integrated ad ecosystem.”