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Agency Sees Ad Dollars Moving to Digital Video

A leading media agency, in a new report, predicts that as
usage of new media technology grows, advertising dollars will shift from
traditional TV to online video.

"Video continues to be the fastest growing segment of
digital advertising, with average CPMs [costs per thousand viewers[ hovering
around $26.00. More advertisers are moving TV dollars over to online video as a
way to expand the supply pool of video and contain TV CPMs,"
ZenithOptimedia says in its New Media Forecasts report. "We expect this
trend to continue as online video adoption continues to rise, fuelled by more
content becoming available through more devices."

The agency says retail, financial services,
telecommunications and automotive are the leading categories for digital
advertising. But it sees growth in the coming years in other categories.
"Consumer packaged goods and entertainment have taken to video in a big
way as it enables them to use sight, sound and motion to convey an emotionally
charged message. Again, we expect this trend to continue as more advertisers
shift TV dollars to video in an effort to optimize their mix and follow the
consumer," the report says.

Zenith forecasts that the percentage of American home
broadband users will continue to grow from 69.6% in 2013 to 72.9% in
2015. Spending on Internet video/rich media is expected to rise to $5.2 billion
in 2013 in 2013 to $8.2 billion in 2015.

The agency sees smart phone penetration jumping from 42.4%
in 2013 to 58.6% in 2015. For tablets, Zenith sees penetration growing to 19.4%
in 2013 to 26.1% in 2015. IPTV will be in just 6.8% of U.S. homes in 2013 and
of homes in 2015.

Zenith says that mobile advertising continues to experience
slow yet steady growth as advertisers begin to recognize the benefits of
reaching consumers of purchase. "The mobile ad market faces challenges,
however, as advertisers can struggle to identify the role that mobile plays in
their overall communications plans," the report says.

According to Zenith, rates for mobile advertising remain
low, averaging between $3.00 and $5.00, as media companies look to lure more
advertisers to test the channel and show revenue on an emerging side of their

Only a handful of premium properties have been able to build
a profitable business in mobile, Zenith says, pointing to Weather, ESPN,
New York Times and Pandora.

"The proliferation of smartphone and tablet adoption,
along with faster access speeds, have ignited marketer interest in mobile
advertising, however, most still question its ability to drive results,"
Zenith says.

Zenith predicts mobile ad spending in the U.S. will be $1.8 billion
in 2013 and soar to more than $4 billion in 2015.

Advertising across IPTV/connected TVs continues to be
a niche, yet growing segment that some brands will occasionally test
to gain knowledge, Zenith says.

The U.S. is not the most advanced market when it comes to
adoption of new media technology. Zenith identified 19 advanced market ranked
according to a combination of absolute size and percent of total ad spend taken
in by Internet expenditure.

By that measure, the U.S. ranked twelfth, with an average
penetration of 19.4%. That figure is expected to grow to 30.8% by 2015, but at
that point, the U.S. will have fallen to No. 14 in the rankings. Zenith ranks
Norway as the top nation in adoption of new media technology in 2012, with
38.8%. The agency forecasts that the Netherlands will be No. 1 in 2015, with
65.1% penetration.