Home Agencies GroupM: Digital Brands Fuel Robust Ad Spend Growth, But Foundation Is Shaky

GroupM: Digital Brands Fuel Robust Ad Spend Growth, But Foundation Is Shaky

SHARE:

Facebook, Amazon and Google might be the biggest ad platforms in the world, but as advertisers, they’ve become the heaviest spenders, according to a global ad forecast from GroupM released Wednesday.

As an advertiser category, digital natives are fueling the fire on global ad spend growth.

Granted, GroupM doesn’t expect the 2019 growth rate to be as explosive as 2018, which benefited from political advertising. WPP’s media buying unit predicts global ad spend will grow 3.4% this year to $590 billion, down from 6.9% growth in 2018. In 2020, another election year, global ad spend will grow 6% to $626 billion.

While political spend is up and down, the ad buying power of digital natives is much steadier. The top eight digital platforms spent roughly $26 billion on paid advertising in 2018, said Brian Wieser, global president of business intelligence at GroupM and author of the report.

Digital natives’ ad spend skews toward digital channels, which will capture 50% of global ad spend growth by 2020. GroupM forecasts digital advertising to grow 13% in both 2019 and 2020 to $308 billion.

“Because they have more capacity to assess effectiveness in closed loop environments, it’s been easy for digital brands to justify spending more,” Wieser said.

But while digital ad spend growth has stayed steady in the high double digits for years, it will eventually plateau as big tech platforms mature as advertisers, Wieser said. Their spending is starting to level out with more established advertiser categories.

“As marketers, they accelerated in 2016 and 2017, and started decelerating in 2018,” Wieser said. “Now, they’re exhibiting behaviors of other marketers.”

Meanwhile, television ad spend will fall 0.3% in 2019 and rise by 1.5% in 2020, thanks to US political advertising. While connected and advanced TV are drawing digital-native advertisers into the medium, that spend is incremental compared to the overall market.

“It doesn’t meaningfully impact how much money flows into the market,” Wieser said. “Just because you see growth in one part of the economy doesn’t mean it’s not slowing down somewhere else.”

 Robust But Fragile

Maintaining strong ad spend growth is subject to geopolitical issues.

“It looks big and fast, but it wouldn’t take a lot to derail it,” Wieser said. “It’s a little bit surprising the world has held up as well as it has.”

With uncertainties like Brexit and an ongoing trade war between the United States and China looming over the global economy, strong ad spend growth could be derailed with a minor twist of events.

“We’re seeing good numbers, but the foundations are not as strong as you’d like them to be if you’re looking for growth,” Wieser said. “Around the world, that’s a pretty common thread.”

Because GroupM recast its US data this year, its latest forecast is not comparable to its December 2018 report.

Must Read

Hundreds of emails, depositions and other documents have been unsealed in the lead-up to the Google antitrust trial, providing a fascinating look at how Google talked about its own products when no one else was watching – especially tools to counteract the rise of header bidding.

Why PubMatic Ditched Its Prebid Web Wrapper, But Never Its SDK

Earlier this month, PubMatic shelved its Prebid integration wrapper, known as OpenWrap Web, and announced it would begin recommending Playwire as an offloading-onboarding partner for the 250-odd publishers that use its wrapper.

Gareth Glaser, Co-Founder & CEO, Gamera

Google’s Buyer Direct Could Beat Agentic Ad Tech At Its Own Game

Agentic AI shows promise for direct deals. But if Google has its way, Buyer Direct could put an end to all sorts of agentic direct sales opportunities while they’re still in the cradle.

How Warner Bros. Discovery Is Creating Value Out Of Dead Air With Pause Ads

Streaming publishers are banking on pause ads to bolster revenue with a more user-friendly ad experience. With programmatic standardization still pending, Warner Bros. Discovery is taking a stab at advancing the capabilities behind its own pause ad formats.

Privacy! Commerce! Connected TV! Read all about it. Subscribe to AdExchanger Newsletters

Peacock Hits Profitability As Comcast Prepares To Spin Off NBCU

Peacock hit what Comcast Co-CEO Mike Cavanagh called “meaningful profitability” for the first time in Q2, just as Comcast decided to let it leave the nest. 

Comic: It's Coming For You

Programmatic Platforms Champion Transparency, But Not If It Means Giving Activists Access

A DSP refused to give ad industry watchdog Check My Ads a seat on its platform, even after both parties cosigned a master service agreement, citing concerns about “protections” for “vendor and supply partners.”

Alphabet Smashes Ad Revenue Earnings Again – But Does It Still Care About Ads?

Investors didn’t bring up Google’s advertising business or ads in general once during the Q&A portion of Alphabet’s earnings report call on Wednesday.