Digital Takes Lion's Share of Ads

For the first time, more than half of U.S. advertising spending is set to go to digital platforms such as Google and Facebook, the world’s largest ad buyer said, a reflection of marketers’ strategy shift as the coronavirus pandemic pummeled the industry this year, reports The Wall Street Journal.

The milestone is just the latest proof of digital advertising’s meteoric rise, a development that has concentrated ad spending with several tech giants at the expense of other platforms, including newspapers, local television and magazines.

Online ads can be cheaper than those placed on other media platforms and they allow marketers to better target and measure the performance of their ads. These advantages have become ever more important during the pandemic as businesses cut ad budgets and consumers spend more of their time and dollars online.

“Digital advertising has been a remarkable bright spot in an otherwise dark year for the advertising industry,” GroupM said in a report expected to be released Tuesday.

Wall Street Journal graphic 12/2/20

GroupM expects marketers to spend $110.1 billion on digital ads this year, or 51% of the total $214.6 billion total U.S. advertising-spending forecast, excluding political ad outlays. Next year, it expects U.S. ad spending to grow 12% to $240 billion, and digital advertising to account for $130 billion, or 54% of the total.

Three years ago, digital advertising accounted for just one-third of all U.S. ad spending, GroupM said—about the same size as newspapers, radio, magazines and local TV combined. As of 2020, these four categories’ combined share of the U.S. advertising market has shrunk to 21%.

When the pandemic hit the U.S. in March, many companies slashed their ad spending as businesses around the world were shut to restrict the virus’s spread. Homebound consumers started doing more of their shopping online, causing small and large companies to place more emphasis on digital ads, said Brian Wieser, GroupM’s president of global intelligence.

Digital advertising is dominated by three competitors—Facebook Inc., Amazon. com Inc. and Alphabet Inc.’s Google—which together account for nearly two-thirds of ad dollars spent on U.S. digital advertising this year, according to research company eMarketer.

As they compete with digital rivals, TV networks have been beefing up their ability to offer brands targeted ads, while retailers such as Walmart Inc. and Target Corp. are using consumer data they have amassed to ramp up their online ad offerings.

National TV advertising is forecast to drop 7.9% to $39.5 billion this year, GroupM said, but the company expects a bounceback in 2021, with a 6.6% increase to $42.1 billion.

GroupM expects the pandemic to accelerate the downward trends for print. It predicts that next year ad spending in newspapers and magazines will decline 12% and 8%, respectively.