Digital advertisers fuel robust rebound in U.S.

The U.S. ad market will grow 22% in 2021 after the pandemic trough, per GroupM

The advertising market is roaring back as companies pour more money into digital following the pandemic. 

U.S. ad revenues will grow 22% this year, according to a forecast from GroupM released Thursday, increasing projections from a March forecast of 15% growth in 2021. The new figure represents a robust 15% growth over 2019 ad spend, following a 5.6% decline in 2020. 

The surge is being driven by new and newly public companies that are spending a large portion of their revenues on advertising to drive fast growth in the public market, said Brian Wieser, global head of intelligence at GroupM.

Mobile gaming company Skillz, for example, is making about $250 million in revenue and spending about the same on advertising, resulting in doubling growth year over year, Wieser explained. And analytics company AppLovin is now a billion-dollar advertiser.  

“The pace at which the market is growing was probably the biggest single surprise, and how much of it is coming from digital endemics,” Wieser said. “We have a lot of companies growing fast, and they're doing it through advertising.”

As digital businesses spend more on advertising, digital media will reap the benefits — specifically Google, Facebook and Amazon. GroupM says digital advertising will grow by 33% this year, up from its March forecast of 22% growth, to account for 57% of all U.S. ad spend. By 2026, digital market share will reach 69%. 

“Digital is almost entirely concentrated in those three companies,” Wieser said. “The advertising market and digital are essentially one in the same.”

Also driving digital growth are small businesses, which can break through on digital platforms with smaller budgets, and advertisers from China looking to reach American consumers. Smaller advertisers are likely to spend at least 70% of their budgets on digital media, GroupM says. 

Linear media, however, still has a horse in the race. Despite declining ratings, advertisers still view the medium as the best brand building vehicle, and fast-growing digital endemics are likely to shift budget there as they grow. 

“Traditional media has an important role for most marketers,” Wieser said. “Their capacity to grow will be limited by the fact that the kinds of companies they service are not growing as fast as the advertisers supporting the growth of Facebook, Google and Amazon. So their expectations probably need to be tempered a little bit.”

Linear media companies are also capturing growth as they create more digital offerings. National TV, which GroupM defines as professionally produced video content consumed linearly or digitally, will grow by 8.7% this year, a robust rebound from 2020’s 6.9% decline. 

Beyond 2021, however, growth will remain flat, as ad-free and ad-lite streaming services will be unable to make up for the inventory available on linear TV. 

Audio will also see a sharp rebound of 25% growth after a 27% decline in spending last year, recovering to nearly 8% of 2019 spend levels, driven by digital. And out of home will experience 21% growth off of a 27% decline in 2020, clocking in 12% below 2019 spend. But while audio will likely remain flat in the future, OOH will continue to grow as digital billboards scale and technology and luxury brands embrace the medium.  

“The problem is the bulk of the [audio] business is centered with local advertisers, which account for a diminishing share of the economy,” Wieser said. “If the industry is organized around serving them, it will never really grow.” 

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