Once upon a time digital disruptors were able to build products and enjoy rapid growth without having to spend big on advertising. In other words, the product was the marketing.
Or as marketing veteran Karen Ganschow puts it in this week’s cover story: ”If you create a great solution to a customer problem online they will often find it before you have had a chance to promote it. [For example] We all piled onto to Google, Uber, and Airbnb without any of them doing any traditional advertising.”
But markets have matured, and today digital-first brands that are endemic to the internet contribute a substantial share of global advertising, accounting for a majority of the world’s growth in spending on advertising.
According to a new report from GroupM, “Digital companies around the world like Alibaba, Alphabet, Amazon, Booking.com, eBay, Facebook, IAC, JD.com, Netflix and Uber account for $36 billion in spending, accounting for a majority of the world’s growth in spending on advertising.”
The figures are drawn from the companies’ securities filings which show each of them is now $1 billion+ advertiser, spending $36 billion on ads during 2018, up by a quarter over 2017 levels. The report forecasts growth in 2019 “was presumably very similar.”
“To the extent that these companies tend to take shares of consumer spending from others and do not directly cause the global economy to expand, at some point their growth converges with global averages, resulting in slowing growth in spending as well,” the report states.
Digital transformation efforts from traditional brands are also helping lift digital advertising spending as companies’ media plans aim to drive direct-to-consumer concepts, sales via third-party e-commerce channels, and focus on driving consumers to digital experiences, including websites or branded content.
The report titled, This Year Next Year: Worldwide Media Forecasts, states internet-related advertising is now unambiguously the most important medium globally, with $326 billion in ad revenue during 2020, up from $294 billion in 2019.
According to the report, Google and Facebook are likely to generate somewhere around $175 billion on a net basis, while other large sellers of digital advertising—including Microsoft, Amazon, Verizon, Twitter and Snap—will generate approximately $25–30 billion in digital ad revenue this year.
In Australia, the advertising market is expected to remain flat heading into the new year.
“We see at the present time with that country’s economy soft and facing a real risk of recession for the first time in decades. The Australian ad market was likely only stable in 2019 versus 2018 and probably grows only slightly in 2020, for a +2.0 per cent gain expected next year,” the report states.
This week Australia’s media owners jointly launched a new campaign to encourage brands to keep advertising through tough economic conditions over the next six months, noting that we are already in an advertising recession which could worsen.