From a Wall Street Journal story by Suzanna Vranica headlined “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.
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. . . .
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.
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.
“The biggest beneficiaries are Google, Facebook and Amazon,” Christian Juhl, GroupM’s global chief executive, said in an interview. “They have done a good job of showing ad performance—and when they show performance marketers shift dollars.”
Small-to-midsize businesses in particular have flocked to digital advertising during the pandemic, according to a recent report from media analyst Michael Nathanson. “Due to the favorable combination of granular targeting and low creative marketing costs, small businesses have gravitated to digital marketing in force,” the report said.
The growth of digital ad spending comes despite headwinds faced by some tech giants this year. Facebook was the target of a high-profile ad boycott in August that was called for by civil rights groups demanding the social-media company do more to rein in hate speech on its website. Despite that, Facebook said its ad revenue jumped 22% from a year earlier in the third quarter.
Digital ad revenue for Google rose nearly 10% to $37.1 billion in the most recent quarter, while Amazon’s ad business grew sharply, with sales up 51% to $5.4 billion in the quarter. . . .
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.
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