Growth rate for ad spending on e-commerce sites will max out in 2020, eMarketer finds

Dive Brief:

Marketers will spend $17.37 billion advertising on e-commerce sites and apps this year, up 38% from 2019, according to eMarketer's first forecast of the channel that was shared with Marketing Dive.
The growth rate for ad spending in the e-commerce channel is expected to max out in 2020, with growth slowing to 29.8% in 2021 and, by 2024, it is expected to come in at 13%.
Amazon is the largest platform, representing 75.7% of the channel's overall ad spending, and is likely to hold onto its dominant role, according to eMarketer. The next closest retailer is Walmart, which will see $849.4 in retail ad revenue this year, representing 4.9% of total U.S. e-commerce channel ad spending. EMarketer forecasts Walmart's market share will reach nearly 7% by 2022.

Dive Insight:

EMarketer cites the pandemic as one of the major factors for the accelerated growth in e-commerce ad spending, as the channel has accounted for a larger percentage of brands' and retailers' sales. By the end of the year, e-commerce channel advertising will represent 12.2% of U.S. digital ad spending, according to information shared with Marketing Dive. By 2024, the channel is expected to account for 15.8% of all digital spending.

The report reinforces e-commerce as a media platform, not that any reinforcement was needed. In recent months, retailers such as Walmart, Target, Rite-Aid and CVS have opened or ramped up ad sales on their media platforms.

"E-commerce channel ads are gaining popularity as brands realize the value of targeting prospects exhibiting purchase intent within the large e-commerce marketplaces," Andrew Lipsman, eMarketer principal analyst at Insider Intelligence, said in a release. "While Amazon has already proven itself as an ad platform, the next wave of e-commerce power players is now making more aggressive moves in the space."

In addition to the retailers already mentioned, eMarketer expects online sites eBay and Etsy to also maintain large presences in the e-commerce media market. EBay's channel ad revenues will reach $328.3 million in 2020, up 30.3%, according to eMarketer. Etsy's revenues are on track to reach $133.2 million, up 69.8%.

The trend of retailers opening up their digital properties to advertising has intensified this year as retailers grasp the value of the consumer data they own. In addition to giving brands access to valuable consumer data and attention, the platforms give retailers a chance to drive revenue at a time when consumers are visiting stores less frequently, a trend that was apparent even before the pandemic hit.

Though the pandemic has undoubtedly played a role in these huge gains this year, e-commerce as an ad platform is also an idea whose time has come, said Nicole Perrin, eMarketer principal analyst at Insider Intelligence.

"As advertisers look to a future where it’s harder to identify and track users, e-commerce properties have the advantages of shopping and intent data on the targeting side plus closed-loop attribution for measurement and optimization," Perrin said in the release.

Still, it will be a long time before any of the newer entrants truly break down Amazon's dominance in the space. Amazon already accounts for 75.7% of the channel's overall ad spending, and eMarketer believes the retailer will account for 77% of the market by 2022. In 2020, the company is expected to net $13.18 billion in e-commerce channel ad revenues, up 39.1% from 2019.

According to eMarketer, eBay and Etsy will represent 1.9% and 0.8% of the total ecommerce ad market in 2020. The remaining companies account for 16.6% combined.