Ad growth returns, but brands need options in fragmented media landscape

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Digital advertising took a real hit during the first months of the pandemic, but there are signs that growth is returning to the sector. Publishers shouldn’t expect to be returning to business as usual, however. COVID-19 has brought some big changes.

In brief:
  • In 2020, digital advertising spend declined across all channels for the first time, putting an end to over 10 years of digital growth. Online formats performed well in 2019, but were expected to be down by about 12% in 2020.
  • More recent figures from the Advertising Association and WARC suggest better than expected results for 2020, with the drop just 8%. The IAB is also reporting that ad market growth in 2021 will make up for last year’s decline, at least in the UK.
  • Double-digit growth is expected across most media sectors in 2021. Online, UK growth is forecast at about 15%, with the US predicted to see a recovery of less than 4%, Europe 9% and China 10%.
Renewed belief in ad revenue

Even with the decline during 2020’s lockdowns, digital advertising has remained the biggest revenue stream for online publishers. Individual publishers, including US magazine powerhouse Meredith reported real increases for the year, and optimism for sustained growth in 2021 is building.

  • 53% of the digital publishers surveyed for the Q3 2020 Digital Publishers Revenue Index (DPRI) from the Association of Online Publishers (AOP) and Deloitte, reported positive revenue growth. That is more than double the 22% that reported income growth in the previous quarter.
  • Increased subscription revenues continue to get credit for a significant portion of the up turn, but digital advertising remains the largest income stream for publishers. The Q3 2020 DPRI notes that 78% of UK publishers are re-prioritizing ad revenue growth.
  • “It is interesting to note a returned focus on advertising revenue growth as a high strategic priority in the year ahead,” said AOP Chairman Richard Reeves. “Since the outbreak of Covid-19, news sites and premium publishers have attracted greater readerships with their trusted content; fresh opportunities to leverage this will no doubt arise.”

Efforts to revitalise advertising sales will be underwritten by success in subscriptions, taking the pressure off beleaguered display and search teams. But with the Institute of Practitioners in Advertising (IPA) reporting the commercial media landscape becoming increasingly fragmented and diverse, exactly where to target resources in a fragmented media landscape will be a challenge.

  • Lockdown has accelerated the diversification of media habits between generations.The IPA’s latest study finds a 92% difference between how 16- to 34-year-olds and over-55s consumed commercial media during lockdown.
  • The two groups had been 58% similar in their media habits in 2015. That dropped to 21% in the pre-lockdown period and just 8% during lockdown.
  • Under lockdown, 16-34s became more digital in their consumption habits. The 55+ demographic exhibited the opposite, growing the time they spent with newsbrands in print, linear TV, and live radio.
  • “With these changes more diverse media plans have never been so important for marketing to be effective in both the short and long term,” says the IPA’s Simon Frazier.

Lockdown has also impacted the advertising landscape more broadly, shifting the focus and formats of content consumption. From increased interest in ecommerce content to a growth in digital edition usage and better accessibility to first-party data plays, advertisers will need to consider carefully where best to spend their post-pandemic advertising budgets.

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