Tech Giants Gain As Virus Reshapes Ad Spending

STUART HIMMEL

Staff Writer

Digital ads to account for over half of year’s U.S. advertising for first time.

For the first time, more than half of U.S. advertising spending is set to go to digital platforms such as Google and Facebook which is a reflection of marketers’ strategy shift as the coronavirus pandemic pummeled the industry this year. This milestone is just the latest proof of digital advertising’s meteoric rise, a development that has concentrated ad spending with several tech giants at the expense of other platforms, including newspapers, local television and magazines.

Online ads can be cheaper than those placed on other media platforms and they allow marketers to better target and measure the performance of their ads. These advantages have become even more important during the pandemic as businesses cut ad budgets and consumers spend more of their time and dollars on line.

When the pandemic hit the U.S. in March, many companies slashed their ad spending as businesses around the world were shut to restrict the virus’s spread. Homebound consumers started doing more of their shopping online, causing small and large companies to place more emphasis on digital ads. Digital advertising is dominated by three competitors – Facebook, Amazon and Google which together account for nearly two-thirds of ad dollars spent on U.S. digital advertising this year. The biggest beneficiaries are the Big Three. They have done a

Small to medium size businesses have moved to digital advertising during the pandemic. Due to the favorable combination of targeting and low creative costs, small businesses have gravitated to digital marketing in force.

The growth of digital ad spending comes despite headwinds faced by some tech giants this year. Facebook was the target of a high profile ad boycott in August that was called for by civil rights groups demanding the social media company do more to rein in hate speech on its website. Despite that, Facebook said its ad revenue jumped 22% from a year earlier in the third quarter.

Digital ad revenue for Google rose nearly 10% to $37.1 billion while Amazon’s ad business grew sharply with sales up 51% to $5.4 billion all in the same quarter. Mondelez International Inc., the maker of Oreo and Ritz crackers, said it would spend more on digital advertising than on television commercials for the first time this year. Jonathan Halvorson, Mondelez’s vice president of consumer experience, said consumers typically bought snacks in stores, but the pandemic has led to more snack buying online as shoppers try out grocery delivery and other online services. The company started shifting ad spending towards digital ads which “allow a faster link to the actual sale,” he said in an interview. Mondelez expects to continue to send more on digital ads than on TV ads next year.

As they compete with digital rivals, TV networks have been beefing up their ability to offer brands targeted ads, while retailers such as Walmart and Target are using consumer data they have amassed to ramp up their online ad offerings. National TV advertising is forecast to drop 7.9% to $39.5 billion this year but bounce back in 2021 with a 606% increase to $42.1 billion.

National TV ad spending in 2021 is still expected to remain below 2019’s $42.9 billion as the industry faces structural challenges, including consumer traditional pay-television service in favour of internet based alternatives otherwise known as cord cutting.

Due to the pandemic, the downward trend for print will accelerate causing ad spending in newspapers and magazines to drop 12% and 8% respectively.

The largest ad buyer in the world, Group M, is responsible for purchasing an estimated $63 billion in ads each year. Its clients include Ford Motor Co., Unilever and Google.