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Online ad spending is set to top TV this year

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The advertising world is on track to enter new territory this year: Spending on digital ads is forecast to surpass that on TV commercials for the first time. 

Research firm eMarketer projects that marketers will fork over just over $72 billion on digital ads by year-end, including spots on mobile devices. That’s up 20.6 percent from 2015’s $59.82 billion. Spending on TV ads is expected to reach $71.3 billion, up 3 percent from $68.9 billion a year earlier because of spending for the Rio Olympics and presidential election. 

The data, though, tell only part of the story. Online ad rates have come under pressure in recent years, thanks in part to the growth of automated or programmatic advertising auctions. TV commercials often are more expensive than web-based marketing messages because there are far fewer of them. Rates can vary widely depending on time of day (called “daypart”) and content type.


TV also isn’t going to wither anytime soon. eMarketer sees spending hitting $72.72 billion in 2017 and $74.53 billion in 2018. Indeed, MyersBizNet estimates that prime-time ad rates on the broadcast networks rose by 10.6 percent during the recent upfronts, when advertisers get a preview of new programs for the upcoming season. Cable rates for broad entertainment networks jumped by 10 percent and rose 4.75 percent on news channels. This was a reversal from the declines seen in recent years.

“It is definitely not a zero-sum game,” said Paul Verna, an analyst with eMarketer, adding that consumers have grown especially weary of website banner ads. “Every one of these platforms has their place and value.”

That’s key as digital advertising becomes increasingly important -- and competitive -- for smaller players like Twitter (TWTR). The microblogging site streamed Thursday night’s NFL game between the New York Jets and Buffalo Bills, a key test for the company as it seeks to broaden its appeal with both advertisers and users. 

If the strategy doesn’t work, investors may pressure Twitter, whose share price has plummeted more than 20 percent this year, to sell itself, according to Cantor Fitzgerald analyst Youssef Squali.

The recent Olympics broadcast may give Twitter and its ilk hope that advertisers will increasingly buy video on both TV networks and digital platforms. Comcast’s (CMCSA) NBC Universal earned $250 million in profit from its coverage of the Rio games, more than double the $120 million it netted from 2012’s London Olympics -- even though viewership fell -- thanks to the multiple platforms it spread the games across. 

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