Seventy-five percent of ad agency executives believe that online video ads are more effective than traditional television ads. Therefore, it may seem a little bizarre that marketers are spending $74 billion on television advertising and a mere $4 billion on online video advertising this year.
This reliance on not only television ads but also other traditional media outlets has left advertisers playing catch-up as consumers turn to digital media. A study conducted by Venture Capital firm Kleiner Perkins Caufield Byers (KPCB) in 2011 reports that consumers spent 10% of their time on mobile devices and 26% of their time on the internet. However, the amount advertisers spent in each of these categories was disproportionate with only 1% spent on mobile devices and 22% on the internet.
Even with a 90% increase in online video advertising spending and an 80% increase in mobile video advertising, the disparity between viewership and advertising dollars remained in 2012. KPCB reported that consumers spent 12% of their time on mobile devices while marketers spent only 3% on advertising in the same category. The percentage of time and money spent on the internet saw no rise from year-to-year.
Most observers blame the generational gap. Over 105 million millennials (those born between 1982 and 2004) have saturated the market and represent $200 billion in spending power. Baby-boomer CMOs fail to relate to the media habits of the millennials who spend 25 hours a week online. Constantly connected to the internet through smartphones, tablets and laptops, millennials should be a prime target for most advertisers.
However, many CMOs feel overwhelmed with the complex web of options offered by the highly-fragmented internet. The number of digital website choices available persuades marketers to stick with what they know—traditional media brands.
Only very slowly have advertisers begun to take advantage of popular digital media outlets such as online video advertising. In 2012, online video saw a 95% spending increase and eMarketer estimates that video ad spending will reach $4.1 billion in 2013.
Marketers are playing a huge game of catch-up as digital media draws in more and more consumers. In order to bridge the gap between viewership and advertiser dollars, most marketers plan on shifting ad spending in 2013. According to a Nielsen report, 69% of marketers are going to increase spending on mobile advertising, 70% will increase social media marketing and 64% will increase video advertising.
Nevertheless, a much larger percentage of advertising spending must be allocated to internet and mobile outlets. Both channels are growing rapidly and therefore must be matched by rapid growth in advertising dollars.
But in order to truly make these changes in ad spending, CMOs and other marketers will have to break out of their traditional-media comfort zones and move away from many of the skills they were raised on—only then can advertisers catch up to millennial consumers and eliminate this viewership/advertising dollar disparity.