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AA/WARC Expenditure Report the Advertising Associate

Could Nextdoor Be A Better Place Than Facebook To Spend Your Online Advertising Dollars?

How Has The U.S. Online Advertising Market Grown, And What's The Forecast Over The Next 5 Years?

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Mark Zuckerberg, chief executive officer and founder of Facebook Inc., speaks during the F8 Developers Conference in San Jose, California, U.S., on Tuesday, April 30, 2019. Photographer: David Paul Morris/Bloomberg

© 2019 Bloomberg Finance LP  

The U.S. advertising market has seen a marked shift in dynamics over the last decade due to the rise of digital advertising. In terms of component growth, non-digital revenues are expected to decline due to budget shifts towards digital. Among digital advertising channels, the increasing adoption of mobile devices is expected to cause a shift in spending towards mobile, away from desktop. Trefis highlights the historical and expected trend in the U.S. digital advertising market in the interactive dashboard How Has The U.S. Digital Advertising Market Grown In The Last Decade, And What’s The Forecast For The Next 5 Years? using data and trends published by eMarketer, IAB and PwC.

The U.S. online advertising market can be broken down into desktop and mobile internet markets.

  • Desktop advertising revenue growth has slowed down on account of budget shifts to mobile ads. Desktop advertising revenue peaked at almost $39 billion in 2015 and since then have largely remained around $38 billion.
  • Mobile internet advertising revenue has seen significant growth due to the growing adoption of mobile devices. Mobile internet advertising revenue swelled to $70 billion in 2018 from $7 billion in 2013, growing at a CAGR of 58%. These revenues surpassed desktop advertising revenues in 2017.The growth from mobile internet has been able to offset the relative weakness in desktop advertising, driving 20%+ y-o-y growth in the US digital advertising market over the last few years. Total advertising revenue reached $108 billion in 2018 from $43 billion in 2013, growing at a CAGR of 20%.

Going forward, we expect growth rates to moderate due to the base effect and higher ROI expectations from advertisers.

  • The desktop advertising revenue is likely to grow marginally over the next five years. We expect the desktop segment to remain largely stagnant over coming years, with revenues leveling off at $38 billion.
  • While mobile is expected to continue growing and drive the overall industry growth, some level of moderation is likely to occur. We expect the mobile segment to register a CAGR of 21% over 2019-2024 vs a CAGR of 58% seen during 2013-2018. We expect mobile advertising revenue to reach almost $237 billion by 2024.

Driven by mobile growth, the total U.S. digital advertising segment is likely to grow at a CAGR of 16% over 2019-2024 versus 20% over 2013-2018. Trefis expects total online advertising revenue to reach $275 billion by 2024.

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Advertising Pays 7: How Online Became The Engine Of Growth For UK AdvertisingThe report, prepared by UK advertising thinktank Credos in partnership with Enders Analysis, tells the story of the phenomenal growth of online advertising in the UK over the past 25 years. It is filled with concrete, quantitative figures that advertising and marketing professionals can use to demonstrate the critical importance of online to their colleagues and clients.

One of the report’s most enlightening features is a timeline of key market developments in digital and online advertising from 1994 (the year the banner ad was born) to 2018, shown alongside the growth of online and overall advertising spend in the UK. Between 1998, which saw the launch of Google, and 2008, in which CRITEO launched one of the first demand-side platforms and pre-roll advertising arrived on YouTube, online advertising spend grew from a negligible figure to £3.35 billion.

However, even that doesn’t compare to the explosion in online ad spend in the ten years that followed, taking spending on online advertising from £3.35 billion in 2008 to an all-time high of £13.4 billion in 2018. Over the same time period, overall ad spend in the UK has risen from £16.8 billion (2008) to £23.5 billion (2018). This means that online ad spend currently makes up 57% of all ad spend in the UK.

Source: AA/WARC Expenditure Report | Image: the Advertising Association

To put these dates into perspective, Econsultancy was founded in 1999, between the launch of Google in 1998 and the development of AdWords (now known as Google Ads) in 2000. Online ad spend in the year 2000 was just getting warmed up, clocking in at £153 million. And Econsultancy has been there through everything that has followed.

It’s an incredibly exciting time to be in online advertising and digital marketing. Advertising Pays 7 reveals that more than three fifths (62%) of total UK advertising spend is predicted to be online by 2020. “This signifies a huge change in the industry,” Karen Fraser, the report author, writes. “Twenty years ago, online expenditure did not even register in published statistics.” The UK is currently the third-largest online advertising market in the world, behind the United States and China, and ahead of economic powerhouses and countries with much larger populations such as Japan, Germany and Australia.The report is careful to draw a distinction between “online advertising” – which comprises of things like search and social media advertising, online display, advertising on video-on-demand television, and digital out-of-home (DOOH) advertising in cutting-edge cases – and “digital advertising”, which encompasses cinema advertising, television advertising (with the exception of video-on-demand and Freeview Play), the majority of DOOH, and 53% of expenditure on radio advertising. Advertising Pays 7 mainly confines its scope to the former, while still acknowledging the crucial importance of digital advertising and the opportunity and choice it provides to advertisers.

One of the most notable trends observed by the report is the boost that online advertising has given to small and medium enterprises (SMEs), thanks to how effectively it enables businesses to target consumers on a minimal budget. According to surveys carried out by YouGov for the Advertising Association, the percentage of SMEs that advertise rose from 30% in 2013 to 42% in 2017.

Digitalisation has also encouraged SMEs to make use of multi-channel campaigns, with the proportion of SMEs making use of multi-channel rising from 40% in 2013 to 48% in 2017. And this has led to higher profits: companies using multi-channel advertising campaigns were more likely to report increased profits than those that only carried out single-channel advertising campaigns (62% versus 68%).

The online advertising landscape is currently undergoing a sea-change, with far-reaching data privacy legislation like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) prompting businesses to be more transparent about their data practices and reduce their reliance on third-party data in favour of first- and second-party data. Companies like Facebook and Apple are putting privacy at the heart of their business proposition. Bodies like the IAB UK, with its Gold Standard certification, and the Committee of Advertising Practice (CAP), with its recent guidelines for influencers, are similarly encouraging and enforcing increased transparency and better practices within advertising.None of this change has dampened businesses’ appetite for online advertising, in the UK and across the rest of the world. Advertising continues to adapt to changing consumer behaviour, new technology, and shifting online norms, such as the rise of ad-blocking, the demise of banner advertising and pop-ups, and the growth of mobile. The advent of 5G in 2019 promises to usher in even more exciting possibilities in terms of online ad creative, with its vastly higher speeds and dramatically reduced latency. The growth of smart devices and the Internet of Things will also open up new channels for advertising – smart speakers, for one, are already prompting a resurgence in audio advertising and providing new ways to reach consumers.

The 7th Advertising Pays report shows just how far online advertising has come over the past 25 years, but also how far it can still go. Claire Enders, founder of Enders Analysis, writes in the report that, “In just a few years, the online toolkit for advertisers has gone from niche to mainstream, from clunky to sophisticated, from experimental to essential.” The next 25 years of online advertising will unquestionably see even more growth, sophistication, and innovation, with the UK advertising industry at the forefront of the change.

Talk to Econsultancy about how we can help your company can get to grips with modern marketing.

Could Nextdoor Be A Better Place Than Facebook To Spend Your Online Advertising Dollars?

Despite all the controversies, Facebook, with more than 1.5 billion daily users and 16 million local business pages, is still the biggest game in town when it comes to social media. Sure, there's a growing number of people that are abandoning the platform. But, for a business - particularly a small business - looking to grow its brand awareness to the right audience, there are still very few alternatives for its advertising dollars.

The good news is that there are new online advertising choices for the business marketer. A new crop of competing social media platforms are going after Facebook's advertisers - and they're worth taking a closer look.

For example and just this past month, a social media company called Nextdoor raised $123 million from a group of well-known venture capital firms that include Benchmark, Tiger Global Management and Kleiner Perkins. The most recent round of funding is on top the more than $400 million the company has raised since its inception in 2008, giving it a valuation of close to $2.1 billion. So what's all the fuss about? It's about local.

"Around the world, there is a universal yearning for the connectedness of proximity," Nextdoor CEO Sarah Friar told VentureBeat. "Neighbors everywhere still love and care about belonging and contributing to a tangible, real place, as evidenced by Nextdoor's continued growth and expansion throughout the U.S., Europe, and Australia."

Nextdoor is a social media service not unlike its giant competitor. But rather than building your network around the world, you're encouraged to build your network with your neighbors and catch up on things going on locally.  I'm a Nextdoor member and my feed is filled with local news, job postings, crime warnings (I do live in Philly, you know), sports news and invitations to book clubs and bowling parties and why the heck did I even check "bowling" as my interest? I don't even know.

But it's fun. And it's real. And, as far as I can tell there are no Russians telling me who to vote for. Yet.Despite all the controversies, Facebook, with more than 1.5 billion daily users and 16 million local business pages, is still the biggest game in town when it comes to social media. Sure, there's a growing number of people that are abandoning the platform. But, for a business - particularly a small business - looking to grow its brand awareness to the right audience, there are still very few alternatives for its advertising dollars.

The good news is that there are new online advertising choices for the business marketer. A new crop of competing social media platforms are going after Facebook's advertisers - and they're worth taking a closer look.

For example and just this past month, a social media company called Nextdoor raised $123 million from a group of well-known venture capital firms that include Benchmark, Tiger Global Management and Kleiner Perkins. The most recent round of funding is on top the more than $400 million the company has raised since its inception in 2008, giving it a valuation of close to $2.1 billion. So what's all the fuss about? It's about local.

"Around the world, there is a universal yearning for the connectedness of proximity," Nextdoor CEO Sarah Friar told VentureBeat. "Neighbors everywhere still love and care about belonging and contributing to a tangible, real place, as evidenced by Nextdoor's continued growth and expansion throughout the U.S., Europe, and Australia."

Nextdoor is a social media service not unlike its giant competitor. But rather than building your network around the world, you're encouraged to build your network with your neighbors and catch up on things going on locally.  I'm a Nextdoor member and my feed is filled with local news, job postings, crime warnings (I do live in Philly, you know), sports news and invitations to book clubs and bowling parties and why the heck did I even check "bowling" as my interest? I don't even know.

But it's fun. And it's real. And, as far as I can tell there are no Russians telling me who to vote for. Yet.

Online ad spending in the year 2000 was just getting warmed up, clocking in at £153 million.

Online ad spending in the year 2000 was just getting warmed up, clocking in at £153 million.