Media published an article today saying that the global advertising industry is being reshuffled after the outbreak of the new crown virus. Today, advertising is becoming less cyclical and advertising spending is becoming more concentrated. As more advertising budgets shift to the Internet, digital giants such as Google and Facebook seem unstoppable to conquer the advertising market.
It’s been a tough year for the advertising business, not just in terms of creativity. GroupM, the world’s largest advertising company, expects global advertising spending to fall 10 per cent this year compared with 2019. It is clear that the new crown virus outbreak has led advertisers to cut their marketing budgets.
Rishad Tobaccowala, an adviser to Publicis Groupe, the world’s third-largest advertising agency, likened the outbreak to an asteroid hitting Earth: “The Earth will continue to exist, but some dinosaurs will die.” “
Now, as the epidemic stabilizes, a rebranded advertising industry is emerging. The long-suffering offline advertising sellers, as well as creative agencies, which are being strained by customers on both sides, are facing a gradual demise.
Still, this year’s decline in advertising spending is likely to be less than the 11.2% decline in 2009 after the financial crisis. Moffett Nathanson, a research firm, argues that while most of the advertising revenue lost during the 2001 and 2009 recessions never returned, this time it was different: advertising spending would return to pre-epidemic levels as early as next year (Figure 1). Why is that? It’s also thanks to the Internet.
In 2001, when Google was a start-up and Mark Zuckerberg, Facebook’s founder and CEO, was in high school, digital advertising accounted for only 5 percent of the U.S. advertising portfolio (Figure 2). Advertisers spent twice as much on print and radio in 2010 as they did online, although people spent more time on computers and smartphones than on magazines or radio.
But in the end, companies that pulled out radio and print advertising during the downturn realized they no longer needed them. The Internet has attracted new advertisers and persuaded existing advertisers to spend more. Small companies that can’t afford expensive TV clips can experiment online.
Today, Google and Facebook control 60 per cent of the world’s digital advertising. Investors are also eager for Google to introduce ads into its maps app. EMarketer, a research firm, expects Google’s net advertising revenue in the US to fall 4 per cent this year, and believes investors’ voices (introducing ads in the map app) are likely to grow louder.
Facebook, on the other hand, can also place more ad spaces on Instagram and WhatsApp. WhatsApp is currently Facebook’s least commercialized app, according to analysts at Bernstein, a research firm.
There is another, and crucial, reason for the rebound in digital advertising spending. Mary Meeker, the internet queen and partner at Bond Capital, an investment firm, says that a decade ago, digital advertising had little to do with people’s actual media habits, and today it is closely related to how people pass their time (Figure 3).
There is no doubt that the further evolution of these habits will benefit digital advertising. Today, mobile screens have overtaken television stved as the biggest focus. Even before the outbreak, more Americans canceled cable contracts every year.
Now, cash-strapped consumers are collectively turning to cheaper streaming services such as Netflix. Moffett Nathanson expects television ads, which have been doing well, to “finally start to collapse” over the next few years.
Google and Facebook will become bigger competitors in the market as more advertising spending shifts to the Internet, according to Bernstein, a research firm. Last year, the two companies attracted 90 per cent of new online advertising spending. In the next few years, they are expected to increase their share of the global digital advertising market to around 70 per cent, and there is still plenty of room for more advertising (Figure 4).
Of course, eMarketer analyst Andrew Lipsman points out: “If the current growth in online advertising spending continues, the current digital advertising space could reach a ‘saturation point’.” These ads will then penetrate other digital media, such as games. “