OTT ad revenue to hit over $2 billion in 2018, Magna says

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As more people cut the traditional TV cord and turn to subscription services like Dish's Sling TV or Hulu's live service, ad revenue for such so-called over-the-top services will reach just over $2 billion in 2018, up 40 percent from 2017, according to new projections out of Magna, a division of Interpublic Group.

At the same time, spending on set-top box addressable advertising, in which commercials target specific households, is expected to total $815 million this year, up 28 percent, as more marketers look to more precisely target consumers and such technological capabilities become increasingly prevelant.

Magna increased its forecast for U.S. ad revenue growth this year to 5.2 percent, a bump up from its June projection of 4.7 percent, citing a stronger-than-expected first half and robust macro-economic forecasts. U.S. ad revenue will reach $207 billion in 2018, according to Magna, surpassing the $200 billion mark for the first time when including special events like the Winter Olympics and the FIFA World Cup.

Digital advertising, which will pass $100 billion and account for half of the total U.S. advertising sales for the first time, is driving much of the growth. Mobile advertising is projected to grow by 30 percent this year to about $70 billion, which is now more than TV and twice as much as desktop. (Ad sales on desktop will decline 3.9 percent in 2018 at the hands of reduced consumer consumption and ad blocking, Magna says.)

"Despite the concerns about brand safety and accountability from many brands and despite the fact that some CPG brands did actually cut down on digital spend in recent months, advertising revenue growth barely slowed down compared to last year," Vincent Letang, exec VP of global market intelligence at Magna, wrote in the report.

Overall, national TV showed signs of improvement in the first half after declining for six quarters in a row, according to Magna. National TV advertising is expected to grow by just under 1 percent in 2018 to $42.7 billion.

Finance, pharmaceuticals and technology were propelled growth in the first half of the year, with each increasing their ad budgets in the high teens. And retailers grew their ad spending 4 percent from the first half a year earlier. Automotive, movies and restaurants are the only advertising categories to reduce their ad budgets so far this year.

Out-of-home ad revenues are expected to grow by 3 percent to $7.4 billion, a new all-time high. The second quarter of 2018 was the medium's strongest quarter in four years, boosted by a 15 percent increase in digital out-oh-home inventory and 2 percent increase for traditional inventory.

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