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Digital Advertising Dominates the Market

Digital Ads Account for More Than Half of All Ad Spending

This year, for the first time in history, digital advertising will account for more than half of overall ad spending in the US. Digital advertising has been on the rise for a number of years, but the COVID-19 pandemic has accelerated the trend. Over the past 10 months, consumers have spent much of their lives shopping, socializing, and working online. They have spent less time in public where they would be likely to see physical forms of advertising, like billboards.

Analysts expect that marketers will spend $110.1 billion on digital ads this year—51% of the $214.6 billion that will be spent on all forms of advertising. Next year, even if the COVID-19 pandemic subsides, US digital advertising is expected to account for 54% of total ad spending.

Advantages of Digital Advertising for Brands

The rise of digital advertising has been rapid. Just three years ago, only one-third of dollars spent on advertising in the US went into digital campaigns. In 2017, companies spent about as much on digital ads as they did on advertising in newspapers, magazines, local TV stations, and radio stations combined. However, the share of the advertising market of these four categories put together has fallen by 21% while digital ad spending has soared.

When the pandemic first set in across the US in March, many companies made drastic cuts to their advertising budgets. These companies saw digital ads as a way to reach homebound consumers and a way to ensure that every dollar they spent was worthwhile. Digital advertising tends to be less expensive than physical ads. It is also easier for companies to track how digital ads are influencing consumer behavior.

Amazon, Facebook, and Google Lead, but Others Work to Catch Up

Three main companies dominate the digital advertising landscape—Amazon (AMZN), Facebook (FB), and Google (GOOGL). Together, these tech giants account for almost two-thirds of digital ad spending in the US, and they are rapidly gaining new business, especially from small and mid-sized brands. For example, Google’s digital ad revenue climbed almost 10% during the most recent quarter, hitting $37.1 billion.

To keep up with these digital competitors, TV networks are developing new strategies to offer targeted advertising to brands. Traditional retailers like Walmart (WMT) and Target (TGT) are also finding ways to leverage their ecommerce websites to offer targeted digital ads. Digital advertising likely would have seen rapid growth this year even without the pandemic. However, the abrupt change in consumer behavior has made digital advertising even more dominant.

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