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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Home Appliance Companies Offer Hygiene-Focused Products
Adapting to New Consumer Needs
Over the course of the COVID-19 pandemic, consumers have flocked to buy products that focus on hygiene, from Clorox (CLX) wipes to phone sanitizers. Now the $500 billion home appliance industry is recognizing this trend and is finding creative ways to adapt products and meet consumers’ needs.
LG Electronics has added sterilizing ultraviolet lights to its refrigerators. Whirlpool Corp (WHR) built washing machines with systems that heat clothes in a particular way to remove germs and allergens. Beko Electrical Appliances recently launched ovens and refrigerators with sanitization drawers. The company also debuted a “cleaning cabinet,” which is a microwave-sized appliance which sanitizes objects like keys and wallets.
A More Successful Strategy than the Smart Home Initiative
The home appliance industry has struggled to get consumers excited about new products in recent years. Companies invested heavily in smart home technology, but most people have shown little interest in paying a premium for appliances that will text them when their laundry is done or track when they are out of eggs with artificial intelligence. Now, however, the trend of appliances that help people live more sanitary lives is gaining traction.
Additionally, consumers are spending more time at home and putting more wear and tear on their dishwashers, vacuum cleaners, and other appliances. Some households also have extra cash on hand that they might normally have spent on vacations or other activities. This combination of factors has led many to purchase new appliances this year.
Demand for appliances related to cooking and cleaning has seen the most growth this year. Between mid-March and the end of August, sales of vacuum cleaners, fans, humidifiers, and water filters climbed 32% compared to the same period a year ago. Between May and August, demand for washing machines with purifying steam functions rose by 46% year-over-year.
Analysts expect that the surge in demand for appliances will probably taper off next year, but will still be up by 5% during the first half of 2021. Executives in the home appliance industry will likely study this period of growth for some time to try to come up with strategies to drive demand for new appliances in the future.
Netflix Doubles Down on Content for Subscribers in Asia
Netflix Works to Maintain Its Lead
Netflix (NFLX) plans to double its spending on original content for subscribers in Asia next year. The region is one of the fastest growing markets for streaming services. Analysts expect that revenue from streaming in Asia Pacific, excluding China, will hit $15 billion by 2025, which is twice the current levels.
At the moment, Netflix is the top streaming service in Asia Pacific, with a 35% share of industry revenue. Amazon Prime Video (AMZN) is in second place, controlling 10% of the market. However, regional companies are starting to catch up, including Hong-Kong-based Viu, and WeTV, which is backed by Chinese conglomerate Tencent (TCEHY).
Creating Specialized Content
Netflix made its debut in Asia in 2015. Since then, the company has released more than 220 original titles for the market. Over the past two years, the company has spent nearly $2 billion on creating and licensing content specifically for the region. Now it plans to ramp up spending even more, specifically spending on original content creation.
Netflix has recently produced several popular shows geared toward viewers in Asia, including Kingdom, a Korean period zombie show, and Indian Matchmaking, a reality dating series. Next year Netflix plans to make a Korean version of its popular Spanish show, La Casa de Papel. It will also create five new Japanese anime shows, as well as more content for Southeast Asian countries like Thailand and Indonesia.
Netflix’s Pricing Strategy
Netflix has 23.5 million subscribers in the Asia Pacific region. The area is the fastest growing of Netflix’s four main global markets. However, the Asia Pacific region is also the only market where Netflix’s average revenue per subscriber has fallen over the past three quarters.
Netflix currently offers mobile-only plans for less than $5 per month in the Asia Pacific region. This has helped the company grow its user base in India, Indonesia, Malaysia, the Philippines, and other countries. But as the streaming giant pours money into content, it will need to analyze the market carefully and decide whether or not its subscription plans are optimally priced.