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GroupM: Digital Will Capture More Than Half Of All Ad Spend In 2021

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Advertising revenue in the United States is expected to increase by 22% to $279 billion in 2021, a sign that the industry has turned a corner following the uncertainty during the COVID-19 pandemic, according to GroupM’s mid-year forecast released Thursday.

Digital advertising revenue will grow even faster, by 33%, in 2021 – building on last year’s 10% rate of expansion – and account for 57% of all advertising in the United States.

Total ad revenue will increase to $388 billion by 2026.

The forecast marks an improved outlook from GroupM’s year-end US forecast in December, when it expected a smaller 12% increase in advertising growth in 2021.

“By the end of the year, you could see that this [turnaround] was happening – we had more confidence,” said Brian Wieser, GroupM’s global president of business intelligence. He titled his report “Welcome to the Roaring ’20s.”

This year’s turnaround was driven by an economy and advertising market that rebounded more strongly than had been anticipated. The report excluded the impact of political advertising.

Much of the turnaround was attributed to digital media and walled gardens. Amazon, Facebook, Google had soaring revenue the first quarter of 2021, and emerging mobile tech and gaming companies also performed strongly. Performance-based marketers who build their businesses around apps or mobile gaming have massively increased their spending on digital media.

“This is more than just recovery from a weak year and more than just strong markets,” Wieser said.

There is more visibility now into the total advertising market because of the surge of advertising and mobile companies going public.

“Many of these companies went public only recently,” he added. “There are many other gaming companies that we don’t know about where we don’t have public data, and all sorts of Amazon roll-up of companies that we don’t have data on. These companies are, in some cases, doubling their spending on advertising year-over-year, and they’re already at nine figures.”

Mobile gaming companies like Skillz – which went public last year and spent $250 million globally on advertising – and mobile technology company AppLovin, a billion-dollar advertiser which went public in April, are “important sources of growth” in advertising, Wieser said.

There has also been increased spending from China directed into markets around the world, including the United States.

Audio-based advertising is expected to be strong as well, growing 25% this year (although that’s coming off a 27% decline last year), especially with the rapid growth of podcasting, which will likely draw incremental dollars from digital media. Out-of-home advertising, meanwhile, is expected to experience solid growth at 21%.

Television advertising, which includes both linear and connected TV (CTV), is expected to grow by 8.7%, marking a full recovery from 2020’s 6.9% decline. But beyond 2021, growth is expected to remain flat, with incremental shifts out of television by large traditional brands offset by incremental spending by newer ones.

That’s not to say advertisers aren’t leaning into CTV.  About $9 billion in ad spend will flow to CTV in 2021, accounting for more than 15% of total television advertising.

As traditional linear TV viewing drops, GroupM said marketers will turn to CTV for reach and frequency reasons, addressability and the ability to buy more inventory programmatically.

Still, despite the launch of a slew of ad-supported streaming services in the past year, the industry’s continuing focus on ad-free or “ad-lite” streaming will continue to reduce the availability of advertising inventory, potentially at an accelerating pace.

Many media owners who are investing in streaming content are also cutting spending in linear, Wieser said.

“The availability of new types of inventory does not necessarily lead to new advertisers,” Wieser said. “If you invest more heavily in your streaming service and at the same time you have your investment in your non-streaming service, you don’t get to keep all the money from both. The pie is relatively fixed, it just gets divided up differently.”

GroupM’s report also considered the possibility that the Tokyo Olympic Games could be canceled, which could impact US advertisers, who are expected to spend more than $1 billion.

“There might be some negative impacts, but they’d pretty minor in terms of the actual flow of money out,” Wieser said. “Advertisers would look for inventory in other media.”

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