With the ad market roaring back after the pandemic, advertising’s reputation has been somewhat rehabilitated as part of the revenue mix. But platform domination continues to limit growth. Peter Houston rounds up 2021 in advertising as part of our Media Moments 2021 report.

For a couple of years now, we’ve been talking about how subscription revenue is more stable than advertising revenue and chronicling the rush to reader-pays models. Startups in particular have tried to distance themselves from a digital advertising market dominated by the Triopoly and decimated by COVID-19 for most of 2020.

So why are we doing a dedicated Media Moments advertising chapter for 2021? Well, the scale of the ad recovery last year was pretty remarkable. Growth after the COVID crisis crushed 2020 ad sales was to be expected – the only way was up. But the numbers are impressive.

An unprecedented recovery

Press Gazette reported in October that magazine websites led the way in the UK ad recovery with spending in 2021 set to beat pre-pandemic levels. Online advertising at magazine brands in the UK saw a 156% bounce back in the second quarter of 2021 compared to second quarter 2020, the country’s first Covid-19 lockdown.

Comparing January to June 2020 with the same period this year, digital ad spend at magazine brands was up 78% – the biggest half-year recovery of any major media sector. Total ad spend at magazine brands, including print and online, grew by 92% in the second quarter and 28% for the first half of the year. Annual growth is likely to be 22% across the board and 42% online.

More broadly, the October Advertising Association/WARC Expenditure Report forecasts total UK ad spend will grow by 25% over 2021, reaching a total of £29.3 billion. This beats July projections of 18% growth for the year and represents the biggest annual rise on record. 

Worldwide, media intelligence firm Magna predicts advertising spending will grow by $78 billion in 2021, up by 14% to $657 billion, a new all-time high. This is in stark contrast to the 2.5% decline recorded for 2020. Growth is expected to continue through 2022, with a 7% increase forecast.

All 70 ad markets Magna monitors will expand, with China and the UK expected to post the largest gains, 16% and 17% respectively. The US market isn’t far behind, with growth of 15% it is enjoying the strongest increase in 40 years.

At the same time as the ad market is looking buoyant, the post-pandemic reality of reader revenue plays, from acquisition costs to subscriber churn, have started to bite. So much so that some ‘all ads are bad’ start ups have added advertising-sponsorship to their playbooks.

Jacob Donnelly of A Media Operator says, “It has been very exciting to see young media companies – those that got their launch during the heavy subscription-only days of 2020 – realising that there is money to be made in advertising.”

A platform-dominated future

The truth is advertising never really dropped off publishing’s bottom line. Despite the reader-revenue hype and hoopla, ads have remained a major revenue source for the vast majority of publishers. But while publishers rightly celebrate a return to growth, there’s no escaping the fact that digital platforms Google, Facebook and Amazon will continue to take the biggest share of spending.

In the US, where digital ad spending will top $200 billion this year, the Triopoly will claim 64% of that spend. Looking ahead to 2023, eMarketer expects Google to lose share, Facebook to hold steady, and Amazon’s share to grow steadily, from 7.8% in 2019 to 14.6% in 2023.

Amazon is not the only online service company making money from advertising; Adage is reporting that every two or three months a new retail ad network is established. According to Forrester, brands looking to boost their share of customer spending at the digital point of sale are estimated to have spent $5 billion in 2020. 

US retail media ad spend will hit $31.49 billion in 2021, up 53.4% over 2020. By 2023, this figure will pass $50 billion, with the vast majority of retail media ad spend coming from ecommerce channels.

Worldwide, advertising sold programmatically was worth $129 billion in 2020, and expected to grow to $155 billion in 2021. Next year, it is expected that more than 90% of digital display ad spending in the US will be transacted using some form of automation.

Publishers developing first-party data around audience preferences are in a strong position to create targeting solutions that serve up consumer interest and intent. Advertisers on the hunt for post-cookie targeting alternatives will be looking closely at first-party data solutions, particularly those that will support contextual advertising solutions that select and serve ads according to content relevancy.

According to Research and Markets, the global print advertising market is expected to decline 1.4% in 2021, falling to $32.05 billion. By 2025, the market is expected to have contracted to $26.45 billion, down 4.7%.

This article is an extract from our annual report, Media Moments 2021. For more on this chapter including case studies and key statistics, download it now for free.

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