PwC released its Entertainment & Media Outlook for 2014-2018 yesterday, forecasting that online video advertising in the U.S. will hit nearly $6.8 billion in 2018, more than double the projected 2014 level of $3.3 billion.
PwC sees video advertising as achieving a 19.5% compound growth rate from 2013-2018, trailing only mobile Internet advertising, forecast at 22.1% CAGR. Video advertising's share of all wired Internet advertising is projected to jump from 8.7% in 2014 to 14.5% in 2018.
PwC ascribes the expected increases in video advertising primarily to audience growth. The firm sees video advertising as a "lean-back" experience, with advertisers mainly using it for top-of-funnel branding rather than specific lead generation. It also expects programmatic to gain and for emerging technologies to combat viewability issues.
When it comes to TV advertising, PwC expects a more modest 4.9% compound growth rate from 2013-2018, to $83.6 billion. No surprise, PwC highlighted the challenge of ad-skipping on DVRs, and also the opportunity being created by advanced advertising (targeting, personalization) along with new second screen behaviors.
More broadly, while PwC sees U.S. pay-TV subscribers growing to nearly 108 million by 2018, it sees overall penetration dropping to 77% as more viewers rely on broadcast-only and/or OTT options, which PwC believes will become more disruptive going forward. This is due to interest among millennials, continued improvements to OTT services and the emergence of alternatives like Aereo.
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