Federal digital advertising tops television for first time

Government mirroring private sector as industry moves to internet, analyst says

The federal government’s advertising agency spent more than half of its budget online last year, marking the first time the internet has surpassed television as Ottawa’s advertising medium of choice.

Digital media accounted for nearly 55 per cent — $16.8 million — of the $30.6 million the federal government’s agency of record spent on advertising for the fiscal year ended March 31, 2017, according to Public Services and Procurement Canada’s annual report on advertising.

That’s up 62 per cent from $10.3 million from the previous fiscal year, when digital accounted for just 34 per cent of advertising spending. TV ad spending, meanwhile, slid to $6.3 million or 20.3 per cent of total expenditures, down from $15.3 million and 50 per cent of spending last year, says the report released in late January.

Traditional platforms including radio, daily and national newspapers and magazines saw some additional spending, although each category accounted for less than 10 per cent of total advertising expenditures. Ottawa spent about $2.6 million on radio, $2.4 million on newspapers, $1 million on cinema and out-of-home ads and $500,000 on magazines.

Spending priorities have changed dramatically over the past decade. In the fiscal year ending 2007, only 7 per cent of the government’s advertising expenditures went to the internet. That year, TV received 36 per cent of funds, radio 19 per cent and newspapers 26 per cent.

The drastic shift reflects how the internet has restructured the entire advertising industry.

“The government is just mirroring what’s happening in the private sector,” Scotiabank analyst Jeff Fan said.

For the past five years, internet advertising has grown largely at the expense of print media as companies buy cost-effective, targeted ads online, Fan said in a recent report.

“It is widely expected that more of the future shift will be at the expense of traditional TV, which would include not only advertising revenue, but also subscription revenue,” he wrote.

As companies try to reach consumers wherever they watch content, the industry should think of online streaming and TV as a combined video market rather than separate entities, Fan said.

For its part, the federal government said it changed its tactics to reach Canadians where they spend their time: online.

Digital ads are a cost-effective way to reach the nearly 90 per cent of Canadian households that have internet connections, according to the federal report.

Canadians “use digital technologies in their daily lives and expect the government to embrace these means to communicate with them,” it stated. “Digital advertising is also an efficient way to reach specific audiences with messages tailored to questions relevant to them.”

Overall spending by the agency of record, Cossette Media, was stable at $30.6 million, up from $30.3 million. The government purchased an additional $5.5 million directly from media outlets

It is widely expected that more of the future shift will be at the expense of traditional TV.

for total advertising of $36.1 million.

For internet advertising, Ottawa spent about $7.6 million on online display ads, $7 million on social media and $2.1 million on search engine marketing.

Social media spending was split between Facebook at $4.6 million, Twitter at $1.9 million and LinkedIn at $500,000, according to a department spokesperson.

The department would not provide an exact financial breakdown for the other categories, citing commercially sensitive negotiated rates. It did, however, provide a list of where it spent the money.

For search, it bought ads with Google and Yahoo. For display, the pot was split between 70 sources including job search websites; tech giants Google and Spotify; major broadcasters Bell Media, Corus, CBC and APTN; newspapers including Postmedia, the Globe and Mail and the Toronto Star; and smaller organizations including the Manitoba Moose Hockey Club, Quebec Yachting and the Niagara on the Lake Chamber of Commerce.

Kaan Yigit, president of Solutions Research Group Consultants, said the government’s shift is “par for the course” in the advertising industry. Bell and Corus both reported softer TV advertising revenue in their most recent results, he noted.