This segment comprises spending by advertisers either through a wired Internet connection or via mobile devices. It consists of paid advertising placed via search, classified, banner/display, affiliate and mobile channels.
The video sector, which encompasses online television and video-on-demand advertising, is not covered in detail in this chapter, as it is already included in the Television Advertising segment. In-stream and in-banner video advertising are included in the banner/display channel and are not shown separately.
The Swiss Internet Advertising Market
In Switzerland, Internet Advertising is still one of the fastest growing segments of the advertising market. In 2015 its spend amounted to approximately CHF 1.14 billion, a 12.6 per cent increase over 2014.
As Internet use rises among consumers and advertisers, ever more industries recognize the importance and impact of Internet Advertising, so they are increasing their spending and visibility in this segment. Internet Advertising’s share of the 2015 media mix grew to approximately 30%, with an ongoing shift of budget from the classic advertising channels like print and television to Internet.
Search advertising is still the largest channel in Switzerland’s Internet Advertising, accounting for about 33 per cent of volume. This is explained by the steadily-growing search-engine user base, market innovations such as “Google Shopping”, and text ads, which already are a basic advertising medium for advertisers across all industries. Yet, while search is advancing, we expect growth to slow in the long run. The market for paid searches will become saturated, and advertising rates will stabilise.
Classified advertising has almost reached the volume of search. Some of its most prominent websites are: AutoScout24, ImmoScout24, homegate.ch, anibis.ch and jobs.ch. Classified ads comprise paid entries in databases with additional features such as highlighting, logos or interactive content. As search advertising rates increase, due to competition for the best keywords, Classified ads will gain in attractiveness. Still, over the next five years, growth of Classified is expected to be slightly lower than that of overall Internet Advertising.
Banner/display advertising will be shaped by interactivity and “rich media” in coming years. A typical example of rich media is video advertising. As young people are switching off conventional TV channels to watch more specific entertainment options via the internet, video channels as YouTube with 4 Billion video views daily, Facebook with 8 Billion video views daily or other streaming services, video consumption is booming. This behaviour change of younger generations could lead to further material shifts of advertising revenues to this segment.
The classic banner and display advertising – aimed at Internet browsers on desktop computers – will grow less than in the past, as advertisers shift budgets to the mobile channel. Still, classic banners will stay an essential part for large size, cross-media campaigns. In total, Banner/display (including in-stream and in-banner video ads) will grow at a 5.8% CAGR — driven in particular by video — but its share of total Internet Advertising revenue over the forecast period will fall from 28% in 2015 to 26% by 2020.
Mobile advertising will be the growth driver through 2020. While mobile will grow at a CAGR of 18% to CHF 132 million in 2020, its share of total Internet Advertising will still be just around 10%, even in 2020. Ubiquitous mobile devices imply a larger number of users and their longer use of the Internet. In 2016, already 91% use their smartphone or tablet to access the internet. The challenge for publishers will be to monetize the massive mobile user base; the challenge for advertisers will be to pivot their advertising towards mobile. In this channel, there is no indication yet of market saturation.
We expect Switzerland’s Internet Advertising to grow 8 per cent annually over the next five years. This characterises the ongoing journey of digital transformation, and is supported by high prices and a stable economy. All channels are likely to gain ground, with mobile leading the way. Search, affiliate and mobile are predicted to increase their share of Internet Advertising. The other channels will grow, yet slightly lose market share.
The rise of mobile Internet advertising is perhaps the biggest trend in Internet advertising in the next five years. Consumers – especially the young and the city-dwellers – are spending more time on their mobile devices. Since 2015, digital natives use their smartphone as the most frequent (55%) access to the internet. This is driving innovation in advertising formats and technology.
Another trend to factor in is the growing importance of social media and messaging platforms, including Facebook and Snapchat, for the sharing, consumption and distribution of media content, especially video, and especially using mobile devices. The role of the publisher (and the ownership of the inventory) is changing, as power is ceded to third-party platforms. Yet amid this, publishers, broadcasters and other media owners are improving their digital services, in particular to take advantage of the opportunities afforded to them by mobile and video advertising.
Perhaps the biggest challenge for the industry, though, if the potential of Internet advertising is to be fulfilled, will be the effective measurement of ad campaigns across multiple platforms so that advertisers can accurately gauge the impact of different media. Using TV metrics to measure mobile video consumption is not a long-term solution, but as and when cross-platform measurement becomes accepted and adopted, the real value of digital advertising will be realized.
Big data and analytics enable focused customization of online ads. The tracking of user behaviour, paired with more sophisticated algorithms, allows more accurate targeting. This trend will be reinforced by the expansion of the wearables market and allow even more insights into consumer behaviour. As a result, media owners use their audience data to improve the performance of their inventory, while advertisers understand that effective use of data can increase the efficiency of their advertising budgets.
Investments in optic fibre technologies will enhance the bandwidth throughout Switzerland. This will enable faster download speeds and simplify the consumption of high-definition content. Internet advertisement will benefit from enhanced bandwidths through the ability to stream larger data packages to users.
Increasingly, people are simultaneously using different devices and screens. According to a recent study, 81 per cent of people, when watching television, also use their smartphone or tablet at least once every half hour. This adds to the time spent online and the amount of information consumed. Online advertising can benefit from this trend by tailoring advertising to the content consumed on TV.
Internet advertising is complex and driven by new technologies like smartwatches, fitness trackers and the upcoming virtual reality technology. These technologies enable marketers place their adverts on diverse channels. Classic banner and display advertisements are not reaching enough young consumers anymore: in the last few years, ad blocking on conventional computers has increased. Its integration into Apple's iOS 9 in September 2015 brought ad blocking into the mainstream. Recent studies reveal that 20% or more of Swiss users (one third of them are younger than 35 years) have installed ad-blocking software. Internet advertisers must work harder to consider users’ experience, if they are to counter the appeal of ad blocking to users who are fed up with intrusive ads and slow load times.
Part of the solution will be to mine consumer data better, to ensure that advertising is relevant to each individual consumer. Publishers are investing in data analytics to this end. The secret is not just “big” data, but “right” data. The aim is to create “enterprise marketing platforms” that take in data on viewing/purchase behaviour, and then feed it into software that combines marketing models, attribution models and other analytics. The result: predictions that relate watching to buying, more precisely than ever before.
Processing and utilising consumer data confronts advertisers with new challenges. Especially in small Switzerland it is difficult to find the right granularity, to mitigate wastage but to target the right audience. Still, we are convinced that intelligent software will create future opportunities for customized, specific adverts that will increase marketing efficiency.
Another way to counter ad blocking is through native advertising: sponsored and branded content. Native advertising is a strategic marketing approach focused on creating and distributing valuable, relevant, and consistent content to drive profitable customer action. Ever more renowned firms are using this to promote their products and services in a pleasant, unobtrusive way.
Major players in the space are investing to ensure that they own the means to plan, to sell and to measure digital ads. Still, concerns about the impact of programmatic trading on the value of inventory, and the current cost and complexity of ad tech, are not fully incentivizing advertisers to migrate to digital platforms. As such they remain a potential barrier to growth.
Comparison to Western Europe
Internet Advertising in Switzerland has caught up to and sometimes exceeded growth rates in Western Europe. We expect Switzerland’s growth rates to remain stable over the next few years. Western Europe has a slightly higher potential for short-term growth, because most of its national markets are not as saturated as Switzerland’s.
Switzerland is very attractive for business. With excellent infrastructure, education and international ties, the country attracts talent and investment from all across the world. This will drive growth of Internet Advertising in Switzerland.