Ad market's growth exceeds broader economic recovery, fueled by digital

Dive Brief:

Three new industry reports predict a remarkably strong advertising market heading into 2022, building on an already better-than-expected pandemic rebound. One of the firms, Magna Global, recorded its highest growth rate ever for the international advertising market, with all forms of media spending up 22% year-on-year to reach a record $710 billion.
Global digital ad sales spanning search, social, video, banners and audio increased 31% YoY to hit $442 billion globally, per Magna Global. Those formats now account for 62% of total worldwide ad sales. The U.S. ad market grew 25% YoY to $284 billion, with pure-play digital ad sales up 37%. In 2022, the U.S. will reach a total market value of $320 billion, supported by 18% growth in pure-play digital.
GroupM, the media investment arm of WPP, posted similarly rosy findings, with global advertising up 22.5% when stripping out U.S. political advertising and digital accounting for 64.4% of revenue in 2021. Zenith found that the pace of digital transformation has been "higher than expected," helping bolster a global market it foresees commanding $705 billion this year. The uniformly positive outlooks suggest near-term supply chain disruptions will not slow momentum for ad spending.

Dive Insight:

While their projections vary, advertising's tea-leaf readers all have essentially the same takeaway to share as the industry prepares for 2022: The market has rebounded at a shocking rate this year and will likely remain healthy in the months ahead as digital continues to drive the agenda.

This year's blowout figures reflect how many advertising functions were cut off last year as brands peeled back in the uncertain early days of COVID-19. Even factoring in the need to close that vacuum, the return of activity is noteworthy and outpaces pre-pandemic figures in many cases. The health of the advertising market is typically tied closely to the economy but has in recent months stayed on its own meteoric trajectory despite exterior volatility.

"The global ad market recovered above and beyond the economic recovery in 2021," Vincent Létang, executive vice president of global market research at Magna, said in a press statement. The agency's report described growth as in excess of the larger recovery.

Analysts have frequently emphasized digital media's role in revitalizing the industry, but a theme present throughout the latest forecasts is surprise at just how stratospheric demand has been. GroupM, for instance, said it now expects pure-play digital platforms will grow roughly 39% in 2021 versus growth of 29% projected in July. Zenith expects social media ad spending to reach $177 billion next year, blowing past television, while digital channels broadly will exceed 60% of global ad spend for the first time.

Several factors are underpinning the boom. Internet-connected TV continues to capture consumer eyeballs and more robust ad tech. Magna Global and Zenith both highlighted e-commerce as another important driver of investment.

Zenith described e-commerce as not only the development of shopping platforms, but also brand advertising to promote those offerings, performance media to drive traffic to them and the proliferation of retail media, where marketplaces double as venues for other brands to run ads. Retailer media saw 47% growth in 2021 to reach $77 billion, per Zenith, now making up one-fifth of all expenditures on digital display and paid search.

Walmart, Target, Kroger, Best Buy and Lowe's are among the traditional retail companies quickly expanding their ad sales businesses as they contend with changing shopper habits and digital heavyweights like Amazon. Meanwhile, social media apps like TikTok, Instagram and Snapchat are all doubling down on commerce capabilities to diversify revenue streams in the face of changes to user tracking.

Zenith said digital ad spend will stay healthy in 2022, with growth of 14%. The threat of the highly contagious omicron variant of COVID-19 was not factored into the research, but Zenith noted that it may cause additional shifts related to e-commerce and digital media.

If the amount of marketing activity is staggering, it's not spread out evenly. The U.S., U.K. and China disproportionately dominate the field, per GroupM, together accounting for about 70% of total industry growth despite making up roughly 60% of the market.

Digital is also marked by imbalance. Google owner Alphabet, Amazon and Meta — the company formerly known as Facebook — take up 80-90% of the global pie, according to GroupM.