Ad industry growing at record pace
New estimates suggest the advertising industry grew faster this year compared to any point in recent history.
Why it matters: The sector's success has long been tied to the health of the global economy. But new growth opportunities driven by the pandemic, like e-commerce, have allowed the industry to flourish despite wider economic constraints from the pandemic.
By the numbers: In June, GroupM — a global advertising agency — predicted that the global advertising growth rate for 2021 would be 19.2% compared to the dismal year prior.
- On Monday, it released updated predictions that the global advertising growth rate would actually hit 22.5% this year, a historical year-over-year high.
- A similar forecast released Sunday from Magna, another ad agency, also estimated a 22% ad industry growth rate in 2021. Magna said it was "the highest growth rate ever recorded" by the agency, beating a 12.5% growth rate in 2000.
- The global ad industry now stands at $766 billion and is expected to hit $1 trillion by 2025.
Be smart: Experts say what caused such massive growth was the rise of opportunities to expand the ad market that didn't exist before the pandemic.
- Many small businesses finally went online and used online advertising to market their new digital presence.
- "The pandemic has disrupted shopping habits, rapidly accelerating the adoption of ecommerce," per a forecast from ad agency Zenith released Monday.
- A rise in e-commerce platforms, like Amazon, also drove more advertising, as brands increased spending to promote products within retail websites. GroupM forecasters note that marketers in China may have put extra dollars into digital advertising to reach overseas consumers.
Yes, but: While most countries globally saw ad spend growth, the growth was disproportionately occurring in the world's largest markets.
- The U.S., China and U.K. collectively account for 70% of the world's ad sector growth, but only 60% of its ad spend.
- Magna's forecast notes that growth was particularly strong "wherever COVID vaccination was fast and deep and allowed full business re-opening early in the year."
The big picture: Digital advertising dominated traditional ads this year, accounting for roughly 64.4% of total global advertising in 2021, up from 60.5% in 2020 and 52.1% in 2019.
- GroupM estimates that somewhere between 80%-90% of the global total of digital ad spend outside of China belongs to three companies: Alphabet, Meta and Amazon. All three of those companies grew at "historically fast rates in 2021," in terms of ad growth.
What to watch: While traditional media, like TV, radio and print, has a mixed growth outlook, the outsized growth of digital will continue to push the ad industry to new heights.
The bottom line: "We recognize the rates of growth observed in 2021 appear to be historical anomalies in an industry more accustomed to mid-single digit levels," analysts wrote in GroupM's forecast.
- "However, a heightened pace of expansion for the advertising industry could very well persist as long as economies around the world are producing companies that are more reliant on advertising than those they replace."