Television has been the ruler of the advertising dollar for decades, but its time has run out. As younger viewers use their computers, smartphones, and tablets to consume more media than they watch TV, advertisers have had to push their efforts into new mediums. Now everything is coming to a head as digital is about to pass TV in advertising dollars. Essentially, it’s the beginning of the end for television as a moneymaker.
The Changing Landscape
In 2016, it has been estimated that 24% of American households are either cord-cutters or have never subscribed to a cable package in the first place. It is also believed that Netflix users avoid 160 hours of commercials every year. As viewers find new ways to avoid being exposed to traditional advertising, advertisers must find new way to diversify their efforts, stay relevant, and to even just be heard.
Because viewers under the age of 35 now watch only half the amount of live television than their older counterparts, advertisers are allocating more money to their digital endeavors than ever before. Unfortunately for television, since companies only have so much money in their advertising budgets, traditional advertising has taken a hit.
This year is the first time that US digital and TV ad spending has been equal, with each expected to account for 38% of the average media plan budget allocation. In fact, digital has already surpassed television for the first time, with a 36.8% allocation rate against 36.4%.
What the Future Holds
The decline in TV advertising dollars is only expected to continue until digital ad expenditures surpass 50% by 2020, while TV falls to 33%. It’s still debatable how far the rates will drop and how much damage this trend will do to the television industry. Since these numbers work concurrently, it’s unsure what they mean for digital. Many advertisers are still trying to determine the optimal amount of advertising dollars they should allocate to digital, before it becomes a sunk cost.
For this reason, traditional advertising isn’t expected to go away entirely, but budgets are definitely being altered to help pay for new ways to reach more diverse audiences. It has been estimated that 50% of US marketers are now spending less on print ads and 40% are spending less on TV ads, as ways to fund digital advertisement.