PWC: Growth in Australia's advertising industry is shrinking fast but online video has taken off

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Growth in Australia’s advertising industry is shrinking fast but online video has taken off.

PwC’s 16th annual Australian Entertainment and Media Outlook report shows consumer and advertising spending slowed significantly to 2.1% in 2016 from 6.4% in 2015.

The professional services group says the result reflects a subdued economy and pressures on advertising-supported business models.

Internet advertising reached $7.4 billion in 2016 and is forecast to account for 55% of the total Australian advertising market by 2021, when it will reach $10 billion.

Online video was the fastest growing area of internet advertising in 2016 and represents a third of display spending. It is expected to have a compound annual growth rate of 23.8% over the next five years.

PwC’s compound annual growth rate forecasts for online advertising:

Source: PwC

“Across Australia’s media and entertainment industry we continue to see a strong divergence in traditional and digital media spend,” says Megan Brownlow, PwC Australia’s entertainment and media Industry Leader.

“The story has been the same for a number of years now. Instead of entrenching the dichotomy between traditional and digital players, this trend is forcing companies to take a different approach and has led to blurring of business functions, business models and of industries.

“Competition is no longer a zero sum game – the new competitive landscape is underpinned by frenemies. We’re seeing three new circumstances arising as companies seek other revenues using their natural competitive advantage: competitors are potential new clients, or new partners, and key suppliers are now competitors somewhere else in the value chain.

“Old-school thinking will need to change as collaborating with rivals becomes the norm. Negotiation is cheaper and more effective than combat. The way to grow in this environment is to identify gaps in the customer experience and collaborate or partner with a competitor or technology provider to address this gap,” she said.

PwC’s report forecast negative a 4.7% for free-to-air television advertising to 2012 and -8.9% for newspapers.

The Australian advertising market in 2016:

And PwC’s forecasts for 2021:

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