Spending by giant digital and tech companies is continuing to boost the overall ad market, including on television, which in turn is driving up overall media costs.
Facebook Inc., Amazon.com Inc., Netflix Inc., Google LLC, eBay Inc., IAC/InterActiveCorp, Uber Technologies Inc. and Booking.com BV are among the biggest digital and tech spenders, advertising executives said at a Dec. 9 industry conference. Together, these companies are spending upward of $1 billion apiece on ads, accounting for some $36 billion in 2018, mostly in the U.S., said Brian Wieser, global president of business intelligence at WPP PLC's Group M. Similar growth in the 25% range is forecast for 2019.
Wieser said Wayfair, Chewy.com and other digitally oriented companies are spending hundreds of millions on advertising, and these types of marketers are likely to continue to spend at such levels for the next few years.
On the TV ad side, Matt James, global brand president at Publicis Groupe SA's Zenith Media, said large direct-to-consumer digital companies are spending on TV to bolster brand awareness and market products and services. Google, for instance, is upping its spending on TV in Australia, Germany and Brazil, James noted.
Relative to the U.S., TV pricing continues to grow even as linear audiences diminish, said Vincent Letang, executive vice president at Interpublic Group of Cos. Inc.'s Magna Global. He said upfront sales for the 2019-20 TV season were strong and the scatter market remains robust. During upfront sales, marketers look to secure schedules on TV networks and their digital extensions ahead of the upcoming TV season. Scatter sales refer to buying commercial time closer to the air date.
Ad-placement rates of $50 and above per thousand impressions will continue as long as enough companies feel they are deriving a good return for such pricing in prime time, Letang said. He pointed to the role of direct-to-consumer companies in providing TV markets with an assist, as such buys lift overall pricing across all media.
As to the forecasts, Group M downgraded its worldwide advertising projection to $628 billion in 2020, pointing to a weakening global economy. That would mark a 3.9% year-over-year advance, down from its June forecast of 4.8%. The world's largest media-buying agency also scaled back its growth estimate for 2019 to 4.8% from 5.7%. The revised 2020 estimate excludes some $10 billion in U.S. political spending.
Zenith's Advertising Expenditure Forecasts call for worldwide ad spending growth of 4.3% in 2020, just above this year's projected rate of 4.2% but disappointing considering it includes political ad contributions from the U.S. presidential election cycle, as well as the 2020 Summer Olympics from Tokyo and the UEFA Euro tournament. All three events generally boost advertising.
Looking further ahead, Zenith's James said the U.S. ad market will expand by $39.1 million between 2019 and 2022, while China's will gain by $10.3 billion over that span. Combined, the two nations will account for 56% of all ad expenditures amelioration over the next three years.
Magna Global projects 4.6% ad growth in 2020 on an underlying basis. Factoring in the U.S. elections and the Tokyo Games, that figure rises to 5.7%, which follows an expected 5.2% advance this year.
Magna noted that ad spending was ahead in 62 of the 70 countries it tracks, notably 5% in the U.S., 9% in China, 7% in Russia, 13% in India and 7% in the U.K.
Magna's research found global linear television ad revenues declined by 4% in 2019, the medium's worst performance since 2009.