Ecosystem Thought — October 25th, 2012
Digital Ad Spend Gap (DAG)
Author: Architect Partners
We’re big fans of themes here at Architect Partners. Themes help us understand the noisy flow of information we’re confronted with on a daily basis.
One theme we discuss here at AP is the digital ad spend gap (DAG). DAG is simple concept. Logically, ad spend ought to roughly correlate to the amount of time people spend engaged in activities where an ad would be seen.
For example, in any given month an average person engages with a wide variety of traditional and digital media. TV, printed newspapers and magazines, radio, on-line and mobile apps are just some of the forms of media we all enjoy. Assuming equivalent effectiveness (which isn’t exactly true) ad spend ought to be allocated in similar proportions to time spent. Today, digital media is getting the short stick from ad buyers. Digital ad spend is proportionally substantially below what one would expect. We estimate that the today’s DAG is on the order of $24 billion annually (U.S. Only).
The quest for these dollars is the “gold ring” driving the monetization strategy of thousands of large and small companies, represents hundreds of billions of equity value and underlies a substantial proportion of venture investment today.
The embedded presentation below highlights our analysis and provides the backup data.