With the advertising market rebounding, online service companies that saw their engagement spike during the pandemic are entering the digital ad sales space in the US. Online retailers, delivery companies and gaming platforms are joining Big Tech and digital publishers in selling promotional space to the brands on their platforms.
Takeaways
- Following the pandemic crash, the ad market is coming back strong; 2020’s online advertising spend was $139.8 billion, according to updated estimates from PwC. Forecasts for this year put online advertising spending at $153.2 billion, with latest estimates predicting a compound annual growth rate (CAGR) of 7.4% between 2020 and 2025.
- The rapid return to ad-market health has sparked interest in the space from online service companies that enjoyed record growth during last year’s lockdowns. From sponsored ad slots inside delivery apps to paid search results on retail sites, online service companies are challenging for advertising spend.
- The COVID e-commerce boom pushed average annual growth of 1% past 20% last year in the US. Brands eager to maximise their share of customer spending and influence customers at the digital point of sale are estimated to have spent $5 billion in 2020.
Online opportunities
- Amazon is the largest online retailer and the third largest player in digital advertising, with an advertising business expected to be worth somewhere in the region of $20 billion this year. Now legacy retailers like Walmart, Target, Best Buy and Home Depot, have built their own ad networks to connect companies to customers.
- In the delivery space, Instacart hired Fifji Simo away from Facebook to lead the company and develop the delivery app’s growing advertising business. Food delivery startup GoPuff, valued at $9 billion, is launching its own ad network and DoorDash has been recruiting for a head of ad sales as it plans to build out its consumer app and an ad business delivering marketing and promotions for global brands.
- In the gaming sector, marketers are now able to run TV-style ads targeting a younger game-playing demographic in console video games. The PlayerWon network lets players opt-in to watch 15 or 30-second video ads in return for gaming perks. A 2020 report from analysts Morgan Stanley forecast reward-based console advertising could reach $2 billion even if only 45% of gamers opt-in.
More than monetising shoppers
For online service companies, advertising promotions are about more than monetising shoppers beyond their purchases. Retailers in particular have the added advantage of being able to drive sales of excess or seasonal stock through these new advertising networks.
Highlighting the likelihood of continued growth in the sector, Senior analyst at Forrester, Colin Colburn, says, “Retail media gives retailers a new revenue stream by monetizing the website and first-party data, and even better, it helps grow margins and profitability”.
”While some retailers have built their own networks, there is an opportunity for technology vendors that will set up a media network on their behalf. GoPuff launched its ad network with CitrusAd.
