A banner year for digital giants

Drawing on their immense audience footprints, Google, LinkedIn, YouTube and Facebook are enjoying record growth rates in mobile and video advertising while local digital publishers struggle.

When the local Interactive Advertising Bureau (the body tasked with representing the interests of the wider digital advertising industry) released its most recent advertising spend numbers earlier this week, one figure in particular stood out: the growth of the humble banner.

Display advertising was up 28.4 per cent year on year for the three months ending December 31, outpacing growth in the traditionally more buoyant search and classifieds categories. This marked the first time that in a calendar year that digital display advertising revenue had surpassed $1 billion.

Where is the growth coming from? From the IAB’s figures, it would appear to be mobile and video. Mobile display advertising had increased 305 per cent on the year to total $349.2m and account for over 30 per cent of the total display advertising pie. Video is experiencing similar hyperspeed growth rates, up 72 per cent year on year and eclipsing $150m for the 12 months.

Who is benefitting from this positive momentum? It's hard to tell.

One group that doesn’t appear to be seeing the same sort of growth are the domestic members of the group formerly known as the ‘big 5’ publishers. The ‘big 5’ was what people used to call the large players in the internet advertising world pre-2010, and was made up of ninemsn, Yahoo!7, Fairfax, News and Sensis/Telstra. There is a glaring omission here: Google.

Based on December quarter results from Nine Entertainment Company, Fairfax Media and Seven West Media, digital growth has slowed significantly. NEC’s figures, released yesterday, reported just 1 per cent underlying revenue growth in their mi9 digital division year on year. Fairfax’s total group digital revenue for the six months ending December 31 was up 6 per cent year on year, with its metro media digital advertising revenue up 6 per cent for the same period. For Seven West Media, which reports digital within its ‘Other’ segment, revenue was flat for the first half of the 2014 financial year. These results demonstrate that these three key players are not seeing revenue increases in line with what the IAB is reporting as the overall growth of the category.

US-based operators Facebook and Google are the two companies most likely to be benefiting from the momentum of display. Within Asia, Facebook saw growth for last quarter of more than 80 per cent, driven in large part by the success of the Australian operation. It is reasonable to assume that Facebook is growing at the same rate (or an even larger rate in Australia) as it dramatically builds its sales team and begins to truly capitalise on its immense audience footprint and unmatched engagement. Facebook in Asia is a $1bn a year business, and Australia would not be an insignificant contributor.

Google -- and most specifically, YouTube -- would be experiencing the lion’s share of the growth generated by video advertising. According to data supplied by Nielsen, YouTube has more than 18 times the video inventory of the next largest video player, Facebook; more than 80 times the inventory of news.com.au; and over 180 times the inventory of Yahoo!7. It is entirely reasonable to assume YouTube generates between $100-$120m of the total $150m video advertising market within Australia.

LinkedIn and Twitter are two other US imports most likely outpacing the industry when it comes to revenue growth. LinkedIn has the added benefit of a dual revenue stream, seeing strong take-up of its display advertising product as well as slowly making in-roads within the employment classified advertising category. Twitter, with a respectable user base and strong credibility amongst the advertising industry, will no doubt be experiencing a warm reception from clients and agencies in market.

The challenge facing the IAB locally is the apparent two-speed nature of the display advertising category. On one hand you have a handful of players seeing rapid growth, rates in excess of 40 per cent and some in excess of 100 per cent annually. On the other, you have a large volume of players seeing single digital growth that is a tough slog. A record growth figure makes for a nice headline, but ultimately doesn’t tell the deeper story of the challenges facing digital publishers, particularly the domestic ones.

Ben Shepherd is a media and technology consultant. He can be found on LinkedIn and on Twitter.