Internet Marketing

Zenith: Internet ad spend growth set to drop to 12% this year – Marketing Dive

Dive Brief:

  • Spending on internet advertising will account for more than half of global ad spend — 52% — for the first time in 2021, according to the mid-year Advertising Expenditure Forecast that Publicis Media agency Zenith shared with Marketing Dive. Currently, internet ads represent 47% of global spend, up from 44% last year.
  • The growth is fueled by online video and social media, which are boosted by faster internet speeds, stronger ad targeting and more powerful mobile devices. However, the growth rate for the internet ad market is expected to drop to 12% this year and then to 9% by 2021, compared to 17% in 2018, likely due to the ad market’s maturation.
  • Paid search, which represented 37% of internet ad spend and grew by 11% last year, is expected to fall to a 7% growth rate by 2021. Reasons include the growing popularity of voice search, which is not yet fully monetized, and the drop in paid online classified ads, compared to free alternatives.

Dive Insight:

While the overall growth of internet ads is making it a bigger part of the overall ad picture, the competition among various online ad types and the maturation of the market are beginning to slow growth.

“2021 will be the first year of single-digit internet ad spend growth since 2001, the year the dotcom bubble burst,” Jonathan Barnard, head of forecasting at Zenith, said in a statement.

Overall, global ad spend is slowing, as the growth of internet ads shrinks. Zenith forecasts a growth rate of 4.6% this year, down from its March forecast of 4.7% and from the 6.4% growth rate of 2018. Almost half of the global ad spend will be in the U.S., again largely due to growth in internet ads.

The Zenith report notes that much of the current growth is driven by small, local businesses that focus on Google and Facebook ads, because of their reach, target audiences and simple self-service tools. Globally, the report points out, small advertisers spend virtually all of their ad budgets online, but large advertisers are assigning less than half of their ad budgets to digital.

The report also highlights two key trends working against ad revenues: the growth of voice-based search, which is not yet seeing an accompanying growth in voice-based ads, and the slowing growth of online classified ads. The latter has enjoyed a heyday as it took over classified ads from print publications like newspapers, but now is itself facing competition from various free sources, such as classified ads on Craigslist. Zenith noted that ad revenues from print newspapers and magazines peaked in 2007 at $164 billion, but will reach just $70 billion this year.

The oldest electronic mass medium, radio, is increasing its ad revenue by 1% each year, the report said. Out-of-home advertising — which is rapidly becoming digital ads on video screens — is growing by 4% annually, and ads in movies — although only 0.8% of total ad spend — is growing by 12% a year, largely because of the popularity of movies in China.

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