Internet ad spend growth is led by online video and social media, which are expected to grow at average rates of 18 per cent and 17 per cent a year, respectively, to 2021. These channels, Zenith notes, are benefitting from continued technological improvements to smartphone technology, connection speeds, and ad targeting and delivery, combined with strong growth in investment in content. 5G technology will further improve brand experiences on these channels.
Other channels are growing much less rapidly. Paid search, which accounted for 37 per cent of internet ad spend in 2018, grew by 11 per cent that year, and Zenith forecasts its growth rate to fall to 7 per cent in 2021. A lot of innovation in search is taking place in voice, which is currently not monetised. Online classified advertising for things such as jobs, property and second-hand vehicles, is starting to lose out to other digital channels, or free alternatives. Online classified advertising grew 9 per cent globally in 2018, but is already starting to shrink in some markets, and in 2021, Zenith expects spending to decline by 1.6 per cent globally.
Much of the growth in internet ad spend is coming from small, local businesses advertising on platforms like Google and Facebook, which offer simple, self-serve tools to manage campaigns, and highly targeted audiences. The global average is made up of very many of these small advertisers that spend all their budgets online, and large advertisers that – on average – devote considerably less than half their budgets to it. Big brands are investing large sums in online advertising, but the majority are still spending most of their budget in traditional media.
“The categories that have advanced the furthest in using modern digital channels are technology, media, finance and professional services,” said Matt James, Zenith’s global brand president. “And even within these, brands still rely on traditional media to create broad mass awareness and reinforce brand values.”
Within traditional media, print has long been in decline. The ad revenues of printed newspapers and magazines peaked at $164bn in 2007 and will total just $70bn this year. Broadcast television is now beginning to shrink, though not nearly on the same scale: Zenith forecasts traditional
television ad revenues to shrink every year from now to 2021, falling from $184bn in 2018 to $180bn in 2021.
Other traditional media are in better health. Radio is increasing its ad revenue by 1 per cent annually. Out-of-home contractors continue to expand their digital display networks, contributing to 4 per cent annual growth in their revenues. Cinema, though accounting for a tiny 0.8 per cent of total ad spend, is growing at 12 per cent a year, thanks mainly to a boom in the popularity of cinema in China.
Zenith forecasts global ad spend to grow by 4.6 per cent this year ($28bn) to reach $639bn (£503bn), marginally down from the 4.7 per cent growth forecast in March. Almost half this growth (US$13bn) will come from the US, which is benefiting from very rapid growth in internet advertising – at 15.4 per cent, ahead of the global average of 11.7 per cent. China will be the next biggest contributor to growth, adding $4bn in extra ad spend, followed by the UK and India at $1bn each.
“The point at which internet advertising exceeds 50 per cent of global ad spend has been approaching for some time, but this is the first time it has appeared in our forecasts,” said Jonathan Barnard, head of forecasting at Zenith. “However, 2021 will be the first year of single-digit internet ad spend growth since 2001, the year the dotcom bubble burst.”
We asked players in the digital ad space for their reation to the Zenith forecasts. Here’s what they said:
Matt Nash, UK MD, Scibids:
“It is great to see that the internet will account for over half of ad-spend by 2021. It is also perfectly natural that this growth rate will drop as the market matures and, in my mind, a 9 per cent predicted growth rate is still positive. To continue this growth, digital advertising needs to lead the way in demonstrating its true business value to brands, proving it is positively impacting the bottom line. With budgets being tightened, the C-Suite need to be confident that their money is being spent wisely.
“In a world where marketers’ goals have become increasingly bespoke, and as multiple and sometimes conflicting goals are measured in disparate systems, a one-size-fits-all approach will no longer suffice. Marketers are looking to optimise their ad campaigns towards custom KPIs that correlate to their true business objectives, and are increasingly using independent sources of truth to measure the real impact of different channels.”
Nick Welch, VP of sales and business development UK and North EU, ADmantX:
“Zenith’s latest ad spend report is a clear indication that ad spend is mirroring consumer behaviour, however, it is really only an indication of the longtail, which has never been the bread and butter of traditional media owners.
“In today’s digital landscape, social and search are truly scaled opportunities with all major audiences participating in some shape or form, which in turn can offer advertisers a clear path to purchase. Moreover, these channels have very clear attribution (all be it inside a walled garden) within their platforms so are deeply attractive to agencies who are working with brands that are pushing for ROI such as sales and proven business outcomes.
“Moving forward, digital publishers that can’t claim to have scaled audience offerings like Facebook and Google need to build deeper opportunities for advertisers around their audiences and their content. They must double down on partnerships that can help them leverage their existing data assets further and use this enriched data to offer premium audience targeting AND unique commercial content opportunities for brands.”
Sue Hunt, chief revenue officer, VIOOH:
“It is positive to see that Zenith’s latest report has revealed that digital out of home has seen a 4 per cent annual growth. This is as a result of an increase in digital screens and evolving technology that is enabling buyers to build both brand building and activation campaigns. Moreover, it’s a channel that can service both big brands and small, local businesses due to its targeting capabilities.
“We believe we’re better together and to continue this impressive growth the OOH industry needs to collaborate to grasp the opportunities that automation and programmatic bring. Together we can make marketing strategies more aligned across digital mediums to deliver unified and memorable brand experiences for those who matter the most – the consumers.
Ken Leren, founder, Marketing Town
“Zenith’s report is a clear indication that digital, and more specifically mobile, will finally emerge as the biggest vertical in advertising. Mobile technologies will only keep evolving and all marketers need to allocate budgets on channels that reach audiences on the move. And in my mind, a reduction in Google’s dominance can only be seen as a positive.
Moving forward, marketers cannot forget about the impact that GDPR and ITP 2.2 is going to have. Digital’s strength is in its attribution and personalisation potential so both frameworks could throw a huge spanner in the works. But if we embrace both the letter and the spirit of this new privacy-compliant world, we’ll be all the better for it, the consumer most of all.”
Sam Huber, CEO, Admix
“Spending growth rate on traditional web advertising naturally slows down as the market matures. To continue to innovate the industry needs competition and agility, something which has been affected by the dominance of the duopoly. However, this doesn’t mean that the whole industry will slow down and I expect to see new platforms which will take over leveraging the burgeoning 5G infrastructure.
“Consumption of 3D content (games, VR, AR) is skyrocketing, up 62 per cent year-on-year, while the growth in consumption of traditional media is slowing down. Advertising is moving from attention grabbing to experiential and XR is the ultimate platform for this. 200+ brands are already using budget to achieve high levels of engagement with consumers, mostly millennials and gen-z. We expect this trend to develop over the coming year.”
Chris Rowett, performance director, Journey Further:
Internet ad spend, especially for SMEs, is focussed on performance to drive a ROI. That’s why PPC spend has grown so rapidly and is now slowing as very few businesses are not doing some form of PPC. However, the growing area of interest for SMEs is programmatic display and video advertising. This is a world in which up until now required big budgets and acceptable wastage in ad spend. This is rapidly changing as a new era of transparent self-serve platforms emerge, with access to much better reporting of key metrics such as impression based attribution. This unlocks a new world of ad spend from SME’s which may see another surge in internet ad spend in the years to come.”
Justin Taylor, UK MD, Teads:
“Given the latest adspend results from the IAB, we are encourage by this continued projected growth for online advertising. However, we are not surprised that this growth will slow down in the coming years as the digital market matures.
“As rapid as historical growth has been, we do predict a more balanced future as agencies and clients look to invest in platforms and sites that they trust. Indeed, the latest IAB figures support the statistics that online video is one of the fastest growing areas of investment as clients see measurably strong ROI – both in the short and long term. The figures also showed that more than 50 per cent of online spend in the UK last year was on mobile – so, as digital spend overtakes traditional, we will see mobile become the dominant channel for marketing spend.
“As exciting as new channels are, if we are to continue to grow we need to ensure we are giving clean advertising experiences to consumers. Only partners who are delivering real results for clients, staying true on brand safety and fraud issues whilst keeping user experience top of mind, will be the ones who thrive into the next decade.
From: Mobile Marketing