Digital ad spending worldwide is up, as the online economy transforms and becomes more crowded.
By William Furney, content marketing manager, Reachology
The first year of the pandemic was a big one for online advertising, with companies pouring lots more cash into their digital promotions and most of it going to the giant search engines and social media platforms. You might not find that surprising but it was happening at a time when entire economies were screeching to a halt as covid-19 forced businesses to close and so marketing and ad budgets were either dramatically slashed or axed altogether.
Despite the grim financial reality, digital ad spend in 2020 rose by 12.2% compared to the previous year, when everything was normal and it was business as usual. That’s according to research carried out by global business-services firm PwC on behalf of the Interactive Advertising Bureau, an industry body based in New York.
Altogether, digital ad spending worldwide — worth $378 billion in 2020 and predicted to leap to $645 billion by 2024, per the graph below — was bolstered last year by ads for online home entertainment, shopping and home deliveries, as people around the world spent large amounts of time under covid-triggered lockdowns, the research notes.
“As the world grapples with the ongoing ramifications of the covid-19 pandemic, the digital advertising sector continues to show tremendous resilience,” an analysis of the study says, adding that another major factor that propelled the sector forward was digital advertising ahead of the US presidential election last November.
What is digital advertising, and how does it work?
Online advertising is based on searches, as it matches ads with what people are looking for on the internet, using keywords to find products, services and everything else. Also known as paid search advertising, it’s a proven way of quickly increasing traffic to a company’s website by targeting online ads to various demographics, like location, gender and age. Unlike traditional advertising, in newspapers and on television, digital ads are highly targeted and the results are precise; and you can control your spend as campaigns progress. It’s so effective and successful that it’s what has made Google the $1 trillion online advertising behemoth it is.
And while it might be relatively straightforward to set up digital ads on the search engines and social media networks like Facebook, Instagram and LinkedIn, running them is a different story, as they require constant monitoring and tweaking of copy and targeting to ensure a solid return on advertising spend. Many companies just don’t have the time, or the expertise, to do it, which is why they may hire a digital PR agency to run digital ad campaigns for them, and count it as part of their overall digital PR spend.
One American company, TeamBuilding, told us that digital advertising was its saviour during the pandemic, as it scrambled to reinvent its corporate structure and stay in business. The firm has more than 100 employees and runs online and in-person team-building events for such big names as Apple, Amazon, Google and Netflix.
“When the pandemic hit, we had to rapidly reinvent our business model. Since we didn’t have existing marketing channels for the new model, we started investing a lot more in ads,” CEO Michael Alexis said.
“For example, we allocate about $10,000 per month to Google Ads. Going forward, we are planning to reduce this spend. Now, as a more established business, we have the flexibility to direct our marketing budgets elsewhere, and want to continue to invest in longterm channels that we own.”
Big winners in digital ad spending in 2020
Perhaps not surprisingly, a large share of digital ad spending worldwide last year was on social media — it’s where a lot of people were spending a lot of time, whether on Instagram, Twitter, Snapchat, Youtube, newcomer TikTok and others.
“Seemingly pandemic proof, social media advertising revenues reached $41.5 billion in 2020. That 16.3% year-over-year growth attributes social media with nearly 30% of all internet advertising revenue (29.6%),” the research says.
And digital video ads were particularly popular, accounting for $26.2 billion in companies’ online spending and the steepest increase of all ad mediums, at 20.6% compared to 2019 — reflecting the fact that many ads on social media networks are video-based.
Looking ahead, and while the good digital ad times look set to continue into 2022 and beyond, some industry experts are warning about possible trouble ahead.
“Seismic changes are looming,” warns a PwC forecast for next year, based on interviews with 20 digital advertising experts, especially with likely regulatory clampdowns on Facebook and other online platforms.
“Federal government attention, as well as keen focus from this industry, is required to reimagine and prepare for regulatory changes in privacy policies and additional actions by walled gardens,” the report says.
Companies may have to be more astute as to where they spend their digital advertising dollars.
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