Cloud and online marketing drives further growth in the TMT sector
- Software companies achieving rapid growth with cloud computing
- Revival of the advertising market with the growth of online marketing
- Price competition in telecommunications set to begin again
IT sector growing thanks to the cloud
The tide appears to be turning for the IT sector, with all segments now recording increases in revenue. In 2014 revenues from IT hardware rose 1.8 percent, following a contraction in 2013. The growth is driven largely by the commercial market and sales of network devices and servers. Growth in this market is generated by mobile and cloud services. Software companies are outperforming the other segments of the Technology, Media & Telecommunications sector, with revenues up by 5 percent. Here too cloud computing is at the foundation of the growth, combined with foreign exports of software services. The cloud is bringing about a major change on the IT market, opening up new markets with almost the whole world set to purchase services in the cloud. This is ABN AMRO’s conclusion in its Vision on the TMT Sector, published today.
Advertising market on the road to recovery
After two lean years, the advertising market also recovered in 2014. Expenditure is rising, in part thanks to major sporting events, the economic recovery and the rapid growth of online marketing. The market share of this advertising medium climbed from 34 to 38 percent in 2014, all of which came at the expense of print (down from 30 to 26 percent). Except in print, the advertising income of all media increased; again it was online, which is now the largest advertising medium, that benefitted most, recording an increase of 11.3 percent. This represents a turning point compared with 2013, when the growth rate fell to 8 percent. This accelerated growth rate is based on the rapid rise of mobile advertising on smartphones and tablets, ABN AMRO believes. It expects the growth on the advertising market to carry over into 2015.
Telecommunications trapped in stagnating revenues
The telecommunications market stagnated in 2014. Contracting segments – mobile and fixed-line telephone services – and growing segments – fibre optics and mobile data – balanced each other out. In 2013 the telecommunications market as a whole grew by around 1 percent. Late in 2014 fibre optics held a market share of 11 percent, generating a slight growth on the broadband market. The acceptance of 4G is proceeding significantly more rapidly, with more than a fifth of the Dutch population having made the switch. Nevertheless the telecommunications market is saturated, ABN AMRO believes. It expects revenues to stagnate, as growth segments such as fibre optics and 4G subscriptions will be unable to compensate for the contraction of the rest of the market. Considering the relatively high rates in the Netherlands, ABN AMRO foresees renewed price competition. Falling prices will boost the acceptance of 4G, however, and cause the use of mobile telephone services to increase. This may pave the way for renewed growth for the telecommunications industry.
‘The economy of the Netherlands is recovering, and almost the entire TMT sector is benefitting. For example, the IT industry has reaped the fruits of the emergence of the cloud, and online marketing is driving growth on the advertising market. TMT firms are benefitting from the solid digital starting position of the Netherlands and a strong creative industry,’ explains Steven Peters, Sector Banker Technology, Media & Telecommunications at ABN AMRO. ‘However, the telecommunications market is not yet growing. Although the promise of the Internet of Things is looming over the market, it is not yet reflected in the results. All the signs indicate that this market is on the brink of a price war. In the long term this might be a positive development: as falling prices might boost mobile telephone services – and in particular mobile data – this might reopen possibilities for new growth on the telecommunications market.’