Why are digital ad spend studies in Canada not more frequent?

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Why are digital ad spend studies in Canada not frequent? It’s an annual question that gets asked by most traditional (offline) media operators for several reasons.

Why do we need ad spend numbers per media?

It tells us about the health of each media compared to the next. When looked at over a few years, it outlines trends which coupled with other economic and market data allow us to forecast what next year’s ad spend might look like.

Media operators need it to build their budget for the coming year. They need indicators of growth or compression in their marketplace so as to be strategic in their budgeting process.

Media operators look to monthly ad spend reports from the likes of Nielsen and other sources to gage how they are doing compared to their competition and to adjust their own set budgets if need be. Some media call these “Tram Reports” which not only provide ad spend per media operator or media group, but also down to the market (city) level.

What do we have available to us in Canada?

Not much really. We have an annual publisher report issued by IAB Canada which surveys the top digital media operators in the country in a double blind study through its partner Ernst & Young (disclosure – I am a long time part-time employee of IAB Canada).

ad spend Canada 1989-2014

This study while being very accurate and detailed – it details ad spend per ad type and per advertiser category, as well as French versus total ad spend – it comes out only once a year, near the end of the summer. This is a problem for broadcasters who’s financial year starts September 1st (i.e. budgets must be done and approved by June usually in this case) and for all other “calendar year” fiscal media operators because they then only obtain actual figures from the previous year, an estimate for the ongoing year and no idea about the coming year for which they are budgeting.

Any other numbers are estimates and guesstimates from various organizations such as eMarketer which give us different insights into what to expect.

Why this doesn’t matter

So far, timely actual ad spend figures, either annual, quarterly or monthly have not really be necessary in Canada. They definitely would be nice to have, but too few have been actually willing to do anything about it.

Why hasn’t this matted so far? Because digital ad spend has been growing wildly for the last 15 years at double and near-double digits!  Exact, timely and detailed ad spend actuals and forecasts haven’t been necessary to plan for next year’s growth. Each organization budgets what they feel is realistic for them in digital among their other media divisions and rarely hit that budget. Yearend comes around and they’ve either not hit the mark or blown the objective out of the water. As the year unfolds reasons for why the budget is met or not become apparent and ultimately “justify” the variance.

Organizations in Canada making the most revenue (by very far) from digital ad spend are digital pure plays like Google, Yahoo, AOL and Microsoft who have gotten very good at their own digital forecasting because that’s their primary focus. The better known Canadian media brands (better known for their offline operations) have always treated digital as less important than their primary media which may be television, newspapers, radio, magazines or even directories – and rightly so as the bulk of their revenues come from their primary offline operation.

These primarily offline operators are the ones looking for more timely and detailed ad spend figures as they are used to working with them offline and expect the same from online. However, their digital revenues are nothing compared to those of digital pure plays and so their request doesn’t carry as much weight – so far…

Why this will very soon matter

Detailed and timely ad spend data will soon become important for all players, both the offline primary players and the digital pure plays.

Why will this matter when it hasn’t really mattered in the past? It is because the double digit growth will definitely end this year or the next.

Bold prediction! How can I say such a thing? A look as the ad spend evolution chart below (note that YP directory line includes both print and digital while all other media is strictly its primary platform) shows that digital is surpassing television this year – that made the headlines this spring. What I see in this chart however is the invisible ceiling we’re about to bump our head against. TV and digital together account for the vast majority of all advertising spend in Canada. Let us assume for now that while it would like to, digital won’t be hurting TV budgets in any big way soon – it might slowly bleed it, but not really hurt it.

If they both keep on growing at current speeds, that necessarily means one of two things: either advertisers’ marketing and advertising budgets are growing at 5%+ per year (which is very hard to believe) or continued TV-Digital growth is stealing other medias’ budgets. Ad spend on other media has been growing in the last few years, albeit at only inflationary rate or 1-3%.

I believe that print ad spend will continue to decrease transferring over to digital, but those dollars are at too small a scale to contribute to strong digital growth, or television’s. Radio looks to be stalling but that too isn’t big enough to contribute to strong ad spend growth for TV-Digital. The one big ad spend pool that is significantly shrinking is yellow pages directly. While they do recoup some of the print loss in digital, there is still significant print losses not recouped by that group which does contribute to increased overall TV and Digital ad spend.

Despite these budget transfers from one media to the next, there is still a limit to how much advertisers are willing to spend / invest in media and we’re about to feel its limit very soon.

When this happens…

When we do hit the ad spend ceiling next year or the year after that, that is when the major digital pure plays will want better digital ad spend reporting so as to devise strategies around conquering their competitor’s revenues, or understanding where their losses are going. Media operators and publishers will also want cross media ad spend reporting, similar to advertisers wanting cross media measurement.

So, for all of you wondering when we will have more timely and detailed ad spend reporting available in Canada, my prediction is not before 2016 and very likely by 2018. Why so late? Because once the need is recognized, the mechanisms to report such numbers will need to be set up, approved and recognized by the industry before the get to be used – and these things take a lot of time…

The Past

I’ve written a few articles about ad spend in Canada, by medium and explaining the various sources in the past. Please check these out:

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