The role of digital advertising & data for the European ...€¦ · audit. •Ingestion of multiple official statistical data sources (eg. Eurostat). •Data relating to advertising

© 2017 IHS Markit. All Rights Reserved.

The role of digital advertising & data for the European media ecosystem and economyDr. Daniel Knapp, Executive Director TMT, IHS Markit


Agenda Today

• Presentation of results from two intersecting studies:

>Contribution of Digital Advertising to the EU Economy

>The Economic Value of Data-Driven Advertising

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Economic Contribution of Digital Advertising

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Measuring economic contribution

We measure the economic contribution of digital advertising in terms of two main metrics:

• Gross Value Add (GVA): a firm’s turnover minus what it pays its suppliers, which can be added up and whose total sum across the economy is roughly equivalent to the economy’s gross domestic product or GDP (GDP is equivalent to the sum of all industries’ GVA plus taxes minus subsidies).

• Jobs Created & Enabled by digital advertising.

4


About this study

• 2015: first attempt to quantify the economic contribution of digital advertising to the EU economy.

• Foundational method developed in 2015 study, update for 2017 release.

• Meta-analysis of third-party studies & extraction of assumptions and models for audit.

• Ingestion of multiple official statistical data sources (eg. Eurostat).

• Data relating to advertising or media content & service revenue is sourced from IHS Markit’s proprietary industry databases and the joint IAB Europe AdexBenchmark report.

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Overview of economic impact flows of advertisingAudience-relatedeffectsAdvertising-relatedactivities

Skills, Industrydevelopment,R&D,infrastructure,etcSpill-overeffects

Extra jobssupportincreasedconsumerdemandforgoods/servicesacrosstheeconomyInducedeffects

Publishers

Consumers

Advertisingservices Brands

SuppliersSuppliersSuppliers

Adsales AdspendDirecteffects

Indirecteffects

SuppliersSuppliersSuppliers

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Converting effect types into measures of economic contributionTypes of Effects Nature of Effects Measure of ContributionDirect Effects (1) Economic contributions from firms in the

immediate advertising value chain.Direct contribution, only taking intoaccount direct effects (1).

Indirect Effects (2) Contributions from these firms’ suppliers,their suppliers’ suppliers, etc.

Extended contribution, taking intoaccount direct effects, plus indirectand induced effects (1+2+3).

Induced Effects (3) Activities that support the jobs ofemployees throughout this extendedadvertising ecosystem (1+2), who in turnspend money as consumers.

Spill-over Effects (4) Effects sui generis for advertising outsidethe immediate value chain.

Overall contribution, adding all typesof effects (1+2+3+4).

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8









9


Up to 6 million jobs in the EU are contingent on digital advertising

11.5

6

0

1

2

3

4

5

6

7

Direct Extended Overall

EU-28: Jobs supported by digital advertising (2015, millions)

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Digital advertising contributes over half a trillion €s to the EU economy

25

118

526

0

100

200

300

400

500

600

Direct Extended Overall

EU-28: GVA contribution of digital advertising(2015, €bn)

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€35.2bn net addition in 11 years….

6.69.2

14.5 15.818.8

21.924.4

28.632.1

37.1*41.8

0

5

10

15

20

25

30

35

40

45

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total online ad spend: historical perspective

€35.2bn

*restated from €36bn as measured in 2015 due to methodology change at local IABs

Source: IAB Europe & IHS Markit12


…as online offsets losses of traditional media, establishing a new advertising market high for the first time since the 2009 recession

0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Traditional vs Online Advertising (€bn)

Other Media Online€111.4bn €112.6bn

Peak ‘traditional’

media

New market high (+€1.2bn)

Recessionary market low

Historical market high

Flat market Online growth offsets decline



Online expands its lead over other media categories*

0 5 10 15 20 25 30 35 40 45

Cinema

Radio

OOH

Print

TV

Online

2016 2015

Ad spend by category in Europe in 2015 and 2016 (€bn)

Source: IHS Markit © 2017 IHS Markit

*broadcaster online video accounted for in the ‘online’ category. TV is linear traditional TV advertising only.



81.5%

16.4%

2.2%

EU-28: Online revenues newspaper & consumer magazines (2016)

Advertising Paid-For* Other**

Advertising is the predominant online business model for newspapers and magazines

15


267

582 1,16

7

2,57

0 4,41

6

7,32

6

11,1

76 13,7

67

16,7

09 19,4

50 22,1

39

419

887 1,68

9

2,83

4

4,05

8

5,32

4 6,91

6

8,04

3

8,86

8

9,47

9

9,76

1

0

5,000

10,000

15,000

20,000

25,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EU-28: Mobile advertising vs app revenue (€m)

Advertising Apps (transactional)

Advertising 1.6x of App revenue in 2016, set to expand lead to 2.2x by 2020

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51.9%

38.2%

6.7%

5.6%

EU-28: Online video revenue distribution by business model (2016)

Advertising Subscription Purchase Rental

Over half of online video revenues are generated through advertising

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Economic Value of Data-Driven Advertising

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About the study

• In- depth interviews and consultations with digital advertising market participants in the EU-28.

• n=30, using principle of sample saturation

• Feedback from countries with a mature digital advertising economy (high digital ad spend per capita) and emerging digital advertising markets (low digital ad spend per capita).

• Adding IHS Markit’s proprietary database expressed in an econometric model.

• Scenario-based impacts calculated through by-company and company-group segmentation of the digital advertising market size. Each company/type has been marked with meta-data on indexes/scores.

• GDPR and ePrivacy impacts have not been separated out as many participants were able to provide feedback on a holistic impact only. In practice, more companies have developed contingency models for GDPR to mitigate impact than for ePrivacy.


Brands are pressured to generate more results & measure ROI from same or smaller media dollars in a post-growth age

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Ad spend is getting decoupled from wider economic growth

US total ad spend GDP

16.5%

13.8%

11.8%

10.4%

7.0% 6.6%

2.7% 2.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

LATAM Africa ME APAC World CEE US WE

Ad spend CAGR 2016-2021: mature ad markets are post-growth


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$1.00

$0.29

$0.14

$0.15

$0.12

$0.05

$0.15

$0.10

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Advertiser Agency Trading desk DMP/Data provider

DSP Ad exchange SSP/Ad network

Publisher

15%

40%

12%

20%

Flow of spend in digital display ad ecosystem

$0.61

Need for ROI and measurability means that in digital display ads, value of data already exceeds media value…


92% 90% 85% 78% 75% 72%83%

65%55%

45% 40%

8% 10% 15% 22% 25% 28%17%

35%45%

55% 60%

0%10%20%30%40%50%60%70%80%90%

100%

New

spap

ers TV

Rad

io

Cin

ema

Out

-of-

Hom

e

Mag

azin

es

Paid

-for

-Sea

rch

Onl

ine

Dis

play

&

Vid

eo

Prog

amm

atic

Mob

ile

Soc

ial

Advertising Spend Structure By Medium in 2016

Media Buy Agency Labor*

Digital MediaTraditional Media

*all agency production & service costs including shoot, talent, creation, advisory, planning, measurement, optimization

…and all media need to answer brands’ call to augment inventory with data, analytics to boost accountability

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Acceleration of cord-cutting makes it harder for brands & agencies to deliver against TV brand advertising KPIs…

-2,500

-2,000

-1,500

-1,000

-500

0

Net

sub

dec

lines

(00

0s)

Net subscriber declines Revenue % growth/decline

Cord cutting in all affected markets: Pay TV net subscriber declines vs revenue % change,

2011 vs 2016

-1,500

-1,000

-500

0

500

1,000

1,500

US: Quarterly pay TV net additions/losses (000s)

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0

1

2

3

4

5

6

0

2

4

6

8

10

12

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Dev

ices

/hou

seho

ld

Inst

alle

d ba

se (b

n)

Global connected AV devices installed base by type

Others

FTA STBs

BD players

Game consoles

OTT STB

Pay TV STBs

Smart TVs

Tablets

PCs

Smartphones

Devices/household

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

North America

Western Europe

CEE

Latin America

Asia Pacific

Middle East and Africa

Connected AV devices market share by type and region, 2016

Smartphones PCs Tablets Smart TVs OTT STBs Pay TV STBs Game consoles Others

• Less mature markets are being driven by smartphones – Asia is a ‘mobile-first’ region

…while an explosion of connected & mobile video devices complicates reaching increasingly distracted consumers

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Purchase data(Auto, CPG, Retail, etc)

Match data(Postal, Email, Cookie ID,

Mobile ID, etc)

Campaign data

(Impressions, Creative Info, etc)

ReachGRP

ViewabilityOCR vCE

EngagementClick-through-rate, Likes

DescriptiveShopper

Behaviour

CorrelatedBuy-Through-

Rate

CausalIncremental Sales Lift ROI

ProxyMetrics

PurchaseMetrics H

olis

tic c

onsu

mer

un

ders

tand

ing

Data pools

Amidst these challenges, new data-driven opportunities for consumer understanding emerge to deliver better ad ROI

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Data helps produce more relevant ads for consumers…

0.7

3.8

7.8

0

1

2

3

4

5

6

7

8

9

run-of-network behavioural retargeting

Average conversion rates display banner advertising*

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…and enhances media companies’ ability to create sustainable business models with free consumer access

0

5

10

15

20

25

30Comparison: advertising cost-per-thousand price ranges

without behaviouraltargeting

with behaviouraltargeting

min: €1.8

max: €25

min: €0.4

max: €8

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Ad Spend using behavioural data to grow by 106% over forecast period

5,813.92,113.6

10,373.121,370.4

0

5,000

10,000

15,000

20,000

25,000

2016 2020

Europe: Digital Display Targeting Ad Spend (€bn)*

No Behavioural Targeting Behavioural Targeting

*definition of ‘behavioural data differs between companies, we have not audited claims & definitions of ‘behavioural’ in this study, demographic data included, i.e. for behavioural look-alike modelling

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Up to 50% value loss on 2016 market size

0%10%20%30%40%50%60%70%80%90%

100%

Current Market Scenario 1 Scenario 2 Scenario 3

Behavioural Targeting Digital Ad Spend: Regulatory Impact Scenarios based on 2016 values

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The market will be thrown back 2.5. to 5 years…

Source: IAB Europe analysis of IHS Markit data

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…and further growth will be additionally hampered

0%10%20%30%40%50%60%70%80%90%

100%

2020 market w/o regulatory change

Optimistic Scenario Balanced Scenario Pessimistic Scenario

Behavioural Targeting Digital Ad Spend: Regulatory Impact Scenarios based on 2020 market forecast

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Thank You

[email protected]

Documents

The role of digital advertising & data for the European ...€¦ · audit. •Ingestion of multiple official statistical data sources (eg. Eurostat). •Data relating to advertising