New Terms Promoted To Explain Advertising

Michael Hedges June 16, 2021 Follow on Twitter

The mid-year advertising forecasts are out and there’s dancing in the streets, at least among the happy advertising people. Double-digit increases are expected all over, almost. Ad spending last year was, at best, tepid as consumers declined to part with their money, except for streaming video subscriptions, and advertisers followed suit.

Magna Global, analytics supplier of IPG formerly InterPublic, released its report of 70 markets with a warm 2021 forecast of 14% ad spending growth to US$657 billion. Ad spending in 2020 dipped by 2% year on year. Next year should also be warm, up 7%. Ad markets, it said, are buoyed by consumer economics, big increases for digital advertising and, of course, big sports events.

“As economic recovery is stronger and faster than anticipated in several of the world’s largest ad markets and consumption accelerates, brands need to reconnect with consumers,” wrote Magna global market research executive vice president Vincent Létang. “At the same time, the acceleration in e-commerce and digital marketing adoption that started during Covid, continues full speed into 2021, fueling digital advertising spending from consumer brands as well as small and (direct to consumer) businesses. This unique combination of cyclical, organic and structural drivers will lead to the strongest advertising annual growth ever monitored by Magna.” In other words, advertisers need to keep spending.

The Magna report highlights the growing disparity between digital as spending and all the rest. Digital ad sales was up 20% to US$419 billion while the rest, referred to as “linear ad sales,” grew by a scant 3% to US$238 billion. Non-digital ad sales dropped 18% in 2020 from the previous year. “Digital growth from consumer brands comes partly at the expense of traditional linear channels but in the case of small businesses (that represent the bulk of search and social ad spend), it is mostly incremental to the advertising pie,” said the report. In other words, digital is all that matters.

GroupM, part of the WPP advertising conglomerate, offered a few days earlier its glowing forecast for ad spending for the remainder of 2021. Global ad spending, it forecasts, will rise 19% over 2020, “thanks, in no small part, to the pandemic.” This observation has been oft repeated in recent months: the disruptions resulting from the coronavirus pandemic altered behavior, from mobile media (“app extensions”) to new business formation and “cross-border media marketplaces,” meaning ad spending from Chinese manufacturers.

The GroupM report also suggests television broadcasters are taking cues from competing streaming services and limiting spaces for ads. To accommodate this change GroupM will now report TV ad revenue as “Connected TV+,” meaning video over digital devices included. “TV’s unique reach advantage is set to erode at a relatively rapid pace in the near term as investments in ad-free or ad-light streaming video services dominate the global industry going forward,” said the report summary.

Another interesting bit: in 2020 the top 25 media companies accounted for 67% of all ad spending, significantly higher the 47% in 2016. Ad spending growth in the UK, Brazil, China and India is expected to exceed 20%. Looking longer term, global ad spending in 2026 could exceed US$1 trillion.

See also...

• Hot Topics - Ad Spending

• Hot Topics - Digital Advertising

• Hot Topics - Media and the Virus

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