Adobe Digital Insights Advertising Demand Report 2016: North America

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Adobe Digital Insight’s latest report, the Advertising Demand Report 2016: North America, reveals new trends around internet saturation and the now competitive space that websites face. This report dives into which advertising channels have been most beneficial to websites and consumer sentiment regarding different forms of advertising within the United States, including thoughts around personalization and what consumers are most annoyed with when it comes to advertising.

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Adobe Digital Insights Advertising Demand Report 2016: North America

  1. 1. © 2016 Adobe Systems Incorporated. All Rights Reserved. Advertising Demand Report 2016: North America Adobe Digital Insights
  2. 2. © 2016 Adobe Systems Incorporated. All Rights Reserved. Methodology Analysis of aggregated and anonymous data – 800 billion visits to 800 North American websites (Jan. 2013 – June 2016):  North American companies in select industries: Media & Entertainment, Retail, Travel, Finance, Automotive, and Health  Websites classified into segments based on change in number of website visits over the past three years • Growth Websites: Visits increased between Q2 2013 and Q2 2016 • Shrinking Websites: Visits decreased between Q2 2013 and Q2 2016  Survey of 1,000+ U.S. consumers, covering their perceptions and preferences around digital advertising and ad blocking (conducted mid-August 2016)  Ad-blocking statistics courtesy of PageFair, based on data through June 2016, including number of blockers installed across 21 countries on desktop and mobile devices
  3. 3. © 2016 Adobe Systems Incorporated. All Rights Reserved. Key Insights 1. Given Internet saturation in the U.S., organic website traffic growth is reaching an end – cross-channel advertising can help drive engaging experiences and entice visitors 2. Long-term ad strategies increase revenue in North America; ad channels deliver more smartphone traffic 3. Consumers believe ads are improving and can be effective, but marketers still have more work to do (Survey) 4. Highly personalized and consistent ads across channels offer advertisers an opportunity to counter ad blockers and avoid losing 23M U.S. consumers to desktop ad blockers over the next few years (PageFair Data) 3
  4. 4. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. North American Internet Traffic has Reached Saturation 4 Region Internet Penetration of Top 20 Economies Key Countries Penetration and Annual Growth North America 77% United States 88.5%, +1.1% Europe 77% United Kingdom Germany 92.6%, +0.9% 88.0%, +0.6% Website traffic has only grown 0.1% over past 42 months (CAGR)  3 out of 4 people already access the Internet (Source: Internet Live Stats) • Traffic increases due to Internet penetration have evaporated
  5. 5. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Eat Lunch or Be Lunch: Websites Are Either Growing or Shrinking Over the past three years:   62% of websites grew – Visits increased by average of 51% 38% of websites declined – Average visit shrinkage was 31%
  6. 6. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Growing firms ensure other advertising channels are part of the mix: Branding Only Takes a Website So Far 6   Brand strength channels: Natural Search, Direct Traffic & Referring Domains Growing firms: 36% more traffic from other tactics (including Email, Paid Search, Social) than shrinking firms
  7. 7. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Growing Websites: 7 Growing Websites Evolve with the Customer Journey    Leveraged more personalized, in-the-moment tactics Social and email garner noticeably higher traffic shares Shrinking websites: Affiliate & Partner tactics have a higher share
  8. 8. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Smartphone Traffic from Advertising Has Increased 40% Those early to the mobile optimization race won:  Growing websites had more smartphone traffic three years ago than shrinking websites  Some sites still struggle: smartphone traffic gap remained the same (43% gap) Ad channels deliver more smartphone traffic: 7 of 10 smartphone visits come from ad channels (vs. 1 of 2 in 2013) 8
  9. 9. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Growing Websites See More Smartphone Traffic on Social and Email 9 Growing websites placed more emphasis on Social & Email channels: • Social: 2.9x more smartphone traffic • Email: 1.7x more smartphone traffic Declining firms relied on Affiliate/Partners and Natural Search
  10. 10. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Multi-Channel Strategies Encourage Growth Across Industries Growing websites see more ad-driven traffic than shrinking: 10    Retail: Biggest gap between those that grew and those that shrank (72% vs. 63%) Finance: Least amount of ad-driven traffic (50% average in Q2 2016) Media & Entertainment: Most traffic from ad channels (72% average in Q2 2016)
  11. 11. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Long-Term Advertising Strategies Increase Revenue 11 Growing retailers see:  Higher RPV for transactional channels (Paid Search, Natural Search, and Affiliates)  Lower RPV for reaching consumers (social, display, and email) RPV for North American Retailers (Q2 2016) Shrank $2.43 Grew $2.60 Difference 7% By combining tactics and the marketing mix, retailers who grew generated an average of $0.17 per visit (+7%) more than retailers who shrank
  12. 12. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 68% of consumers believe ads have improved or stayed the same  Narrow margin: Advertisers have more work to do to deliver the right message at the right time Majority judge marketers as effective at providing interesting ads (57%)  Higher for those ages 25-34 (63%) 12 Consumers Believe Ads are Improving
  13. 13. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Personalized Ad Delivery Needs Improvement 78% of consumers like personalized ads, but only 28% think they’re tailored correctly  Most interesting ads seen while browsing or using social media – when attention can be diverted.  Less likely to notice while doing something with intent (e.g. watching videos or using apps) 13
  14. 14. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Facebook Is Preferred Social Media Platform for Relevant Ads 14 41% of consumers rate Facebook highest in doing the best job at delivering relevant and interesting ads  Marketers should focus on attention, not the transaction
  15. 15. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Some Ads are More Intrusive than Others 15 Consumers unwilling to watch ads with intrusive experiences (e.g. automatic sounds and pop-ups)
  16. 16. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Frequency and Length of Ads Are Actionable Consumer Concerns 16 Video ad length should be monitored:  1/3 of consumers are annoyed by the length  Increases among younger consumers (58% of 18-24 year olds) Frequency capping should be considered for ads:  19% of desktop and 21% of smartphone respondents ad use an ad-blocker due to frequency issues
  17. 17. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. “Skippability” Is the #1 Consumer Complaint About Ads 57% say being unable to skip is the most annoying element of an online video ad  Followed by automatic video and audio, and ad length  48% of consumers will stop watching video if they can’t skip the ad • Share higher among those who make >$50K annually (51% vs. 42%) 17
  18. 18. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Most Consumers Not Interested in Paying for Ad-Free Internet 18 71% of consumers try to skip ads, but only 37% would go as far as paying to avoid ads  • Consumers no longer limited to just expressing dissatisfaction Instead of paying, they can actively block ads by installing blockers
  19. 19. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. U.S. Desktop Ad-Blocking Could Grow to 74M+ Users Globally, monthly active desktop ad-blockers is up 4x since 2013 to 220M:  U.S. ranks in lower half vs. Europe for current desktop penetration (18%) • With large Internet user base (285M), the potential for impact is much higher  If U.S. desktop ad-blocking matches levels similar to Germany, Canada and Sweden… • Could grow by 44% -- adding 23 million people to the pool 19 Country Desktop Ad Blocking Penetration Country Desktop Ad Blocking Penetration France 12% Spain 19% Italy 15% Canada 24% Netherlands 15% Denmark 26% UK 17% Germany 27% US 18% Sweden 28% SOURCE: PAGEFAIR (MAY 2016)
  20. 20. © 2016 Adobe Systems Incorporated. All Rights Reserved. Ad-Blocking Impacts Everyone, From Marketers to Tech Companies 20 Platform POV: “In my mind, [ad-blocking] is a very blunt instrument. And that's why we need to be worried.” - Sridhar Ramaswamy, Google “Revenue generated from the display of ads on personal computers has been impacted by [ad blocking] technology from time to time.” - Facebook earnings call Consumer POV:  44% of blockers find desktop ads annoying  89% plan to continue using one  Not everyone plans to use one (14%) Marketing POV: Specific triggers of ad-blocking adoption: 1. Over-targeting and abuse of personal data (51%) 2. Too many ads (41%) ADI Recommendation: Back off targeting rules and install stringent frequency caps. Source: ADI Digital Advertising Survey 2016
  21. 21. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Display Traffic Has Decreased in Past Three Years U.S. share of traffic from display has decreased by -32% (Q2 2013 – Q2 2016)  Display occupies a unique position in digital marketing as an upper-funnel tactic that can reach new and loyal audiences 21
  22. 22. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Ad-Blocking Users Prefer to Interact Socially As ad-blocking penetration increases, traffic from display tends to decrease  The decrease in display traffic is offset by an increase in traffic from social media  The U.S. sees lower display traffic and higher social traffic– ad-blocking risk less than in Europe 22
  23. 23. © 2016 Adobe Systems Incorporated. All Rights Reserved.
  24. 24. © 2016 Adobe Systems Incorporated. All Rights Reserved. Appdendix
  25. 25. © 2016 Adobe Systems Incorporated. All Rights Reserved. Glossary  Ad Channels - things influenced directly by marketers, i.e. all but Direct Traffic  Natural Search - arriving organically from a search engine as the result of SEO  Direct - entering a URL in the address bar or using a book mark  Paid Search - arriving via an ad, including product ads, from a search engine and SEM  Referral - a referring domain that links to a site  Email/Newsletters - direct communication channels with consumers, includes RSS  Display - an embedded link in an ad displayed on a page  Affiliate/Partner - from a named channel partner, either an affiliate aggregator or a specific site  RPV - revenue per visit  AOV - average order value  CAGR - compound growth rate computed over months
  26. 26. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 25-34 Year Olds More Willing to Watch Online Advertisements 26 Across most ad types, >50% of consumers are willing to watch them  18-24 age willing to watch skippable video ads than any other type
  27. 27. © 2016 Adobe Systems Incorporated. All Rights Reserved. Only 34% of traffic is direct:  15% of visits to U.S. sites come from other countries Source of traffic and ad-driven share vary by country:  Great Britain and Spain: Lead with over 20% traffic from other countries  France and Nordic countries: Much less cross-border traffic U.S. Sees 66% of Traffic Coming from Ad Channels Ad channel traffic includes all sources except Direct Traffic

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