New estimates suggest the ad industry grew faster this year than at any time in recent history.
Why is this important: The success of the sector has long been tied to the health of the global economy. But new growth opportunities driven by the pandemic, such as e-commerce, have allowed the industry to thrive despite the broader economic constraints of the pandemic.
By the numbers: In June, GroupM – a global advertising agency – predicted that the global advertising growth rate for 2021 would be 19.2% compared to the previous year.
- On Monday he published updated forecast that the global advertising growth rate would actually hit 22.5% this year, an all-time high year-over-year.
- A similar forecast released Sunday by Magna, another ad agency, also estimated a 22% growth rate for the ad industry in 2021. Magna said this was “the highest growth rate ever.” recorded” by the agency, beating a growth rate of 12.5% in 2000.
- The global advertising industry now stands at $766 billion and is expected to reach $1 trillion by 2025.
Be smart: Experts say what has caused such massive growth has been the increase in advertising market expansion opportunities that did not exist before the pandemic.
- Many small businesses eventually went online and used online advertising to market their new digital presence.
- “The pandemic has disrupted shopping habits, rapidly accelerating e-commerce adoption,” according to a forecast from ad agency Zenith released on Monday.
- A rise in power of e-commerce platforms, like Amazon, also generated more publicity as brands increased spending to promote products on retail websites. GroupM forecasters note that marketers in China may have invested additional dollars in digital advertising to reach overseas consumers.
Yes, but: While most countries around the world have seen growth in advertising spend, this growth has occurred disproportionately in the world’s largest markets.
- The United States, China and the United Kingdom collectively account for 70% of the advertising sector’s global growth, but only 60% of its advertising expenditure.
- Magna’s forecast notes that growth has been particularly strong “wherever COVID vaccination was quick and deep and enabled full reopening of operations early in the year.”
The big picture: Digital advertising has dominated traditional ads this year, accounting for around 64.4% of total global advertising in 2021, compared to 60.5% in 2020 and 52.1% in 2019.
- GroupM estimates that between 80 and 90 percent of the world’s total digital ad spend outside of China is owned by three companies: Alphabet, Meta and Amazon. These three companies grew at “a historically rapid rate in 2021,” in terms of advertising growth.
What to watch: While traditional media, such as television, radio and print, have mixed growth prospects, the outsized growth of digital will continue to push the advertising industry to new heights.
The bottom line: “We recognize that the growth rates seen in 2021 appear to be historic anomalies in an industry more accustomed to single-digit levels,” the analysts wrote in GroupM’s forecast.
- “However, an accelerated pace of expansion for the advertising industry could very well persist as economies around the world produce businesses that are more dependent on advertising than those they replace.”