Why is advertising revenue so high

Online advertising: Internet advertising revenues compete with TV advertising revenues

The advancing digitization of the media and entertainment industry is reflected in the growth in digital revenue between 2013 and 2018, which will then account for 65 percent of the total revenue growth. The dominance of digital media is particularly evident in advertising. A third of all advertising revenue will flow from digital channels in 2018. This is shown by PwC's Global Entertainment and Media Outlook.

Shifting the advertising budget to the Internet
The spread of smartphones and tablets is driving this development further, in 2018 55 percent of all consumers around the world will have mobile internet access. The advertising industry's reaction to this is to shift budgets to the Internet. Revenues from online advertising are expected to grow by around 10.7 percent per year through 2018, and revenues from mobile Internet advertising by as much as 21.5 percent. Advertising expenditure, on the other hand, is only expected to increase by 4.4 percent per year. In 2018, internet advertising revenues will almost match the level of TV advertising revenues. In 2009, revenues from TV advertising were twice as high as those from Internet advertising.

Consumers want digital content with real added value
Consumers are also investing more and more in digital media, although this trend is developing more slowly than advertising spending. In 2017, digital media will account for 17 percent of consumer spending (excluding internet access fees). The question is how consumers can be encouraged to pay for content in digital media. Basically, it is about offering them real added value, then the willingness to pay is there. Interactivity and convenience are important points, as can be seen in digital music and home video streaming, where users have round-the-clock access. These two sub-segments are among the fastest growing.

Increased sales largely through digital media
Digital media account for two thirds of the expected increase in sales in consumer spending and advertising. By 2018, retail and advertising revenues in digital media will grow 10.1 percent annually to $ 994.2 billion. In the non-digital business, the growth averaged 1.5 percent to 1.16 trillion US dollars. Sales across all 54 countries and areas examined are expected to increase by an average of five percent annually to around 2.15 trillion US dollars from 2014 to 2018.

Internet access fees are a major contributor to increased sales
The fees for Internet access also contribute a lot to the increase in sales. 25 percent of total media and entertainment revenues in 2013 were internet access fees. This proportion will increase to 30 percent by 2018. In contrast, the share of consumer spending in total revenues will decrease from 45 percent in 2013 to 41 percent in 2018.

Industry revenues are growing faster in emerging markets than in Western Europe
The general economic conditions are also relevant for the sales development in the industry. Industry revenue growth in emerging markets is much higher than in Western Europe. The nine rapidly growing markets of China, Brazil, Russia, India, Mexico, South Africa, Turkey, Argentina and Indonesia are expected to generate around 21.7 percent of total sales in the global media and entertainment industry by 2018. In 2009 they only had a share of sales of 12.4 percent. In 2018, China will become the second largest market for the media and entertainment industry after the USA.

German media and entertainment industry in fourth place globally by 2018
The German media and entertainment industry is the fourth largest media market in the world after the USA, Japan and China and will remain so until 2018. The annual growth of 1.9 percent will, however, be well below the average global growth in the industry. In 2018, the total turnover of the German media industry will amount to 123.9 billion US dollars (approx. 94 billion euros). Online advertising (plus 6.9 percent) and internet access (plus 4.9 percent) are the biggest sales drivers here too up to 2018. Online advertising revenue is expected to grow to $ 9.5 billion by 2018, including is due to the growing number of mobile Internet users and the increasing spread of tablets and smartphones. Mobile online advertising is expected to grow by an average of 26 percent to $ 884 million. TV advertising revenues will also rise disproportionately with an annual increase of 2.9 percent by 2018 to 6.4 billion US dollars.

(Source: http://www.pwc.de/de/pressemitteilungen/2014/werbebudgets-verlagern-sich-weltweit-immer-staerker-ins-internet.jhtml)