eMarketer Live Q&A: Digital Ad Spending by Industry 2019

You had questions, we have answers.

Thanks for sending in your questions regarding our “Digital Ad Spending by Industry 2019” forecasts and report collection. Here, eMarketer analysts answer the questions we received from clients.

Q: What are key drivers advertisers have in assessing inventory supply?

A: Inventory choices are often driven by factors like internal expertise, agency-vendor relationships, budget size and the objective that the marketer is trying to hit. Some marketing channels don't scale as well as others, so they're often not primary picks for branding objectives. For performance marketing, it's all about the metric the advertiser is trying to hit and what seems to deliver on it. Here, attribution and advanced measurements come into play to determine what is or isn't working.

Q: How to measure the effectiveness of digital ad spending?

A: We have a few resources that show multiple approaches to answering this. To start, one could read the “Advanced Marketing Attribution” series that gives more detail about attribution and how marketers are measuring marketing success. For more context, the president and the senior director of research and insights for digital advertising company Undertone discussed in this interview the importance of “attention” when measuring an ad creative’s effectiveness.

In this chart, we see a very straightforward answer showing metrics used by US retail ecommerce ad professionals.

Q: What categories are leaning more into social channels?

A: In the UK, all sectors are active on social platforms; this is to be expected in such an advanced online market. That said, automotive is perhaps less active on social than other industries. The industries that tend most toward social advertising and marketing are consumer packaged goods (CPG) and retail.

The landscape in Germany is another story, however. Overall, consumers in Germany were slow to embrace social networking, so advertising on Facebook or Twitter wasn’t an obvious priority for advertisers, until the past couple of years. Now social sites and apps are crucial, and brands are already seeing success from their efforts on social media. For example, data from Storyclash showed that online retailer Otto boosted engagement on Instagram by 33% in May 2019, thanks in part to fashion-oriented posts. Last month, baby goods retailer babymarkt.de saw interactions on Facebook jump by 63% when it launched a contest on that platform.

In the US, healthcare/pharma and financial services are two verticals using social channels. Healthcare and pharma companies are increasing spending on social through platforms like Facebook, Twitter and Snapchat. In April 2019, Facebook rolled out a feature that lets people in Facebook Groups post health questions anonymously through an administrator. The anonymity gives Facebook and pharma advertisers some cover to approach healthcare through the social platform, as Facebook continues to battle data privacy lawsuits.

In a March 2019 poll of 350 US marketers by the Interactive Advertising Bureau (IAB) and Advertiser Perceptions, financial advertisers reported that half of their digital video ad budgets went to Facebook, Instagram, Snapchat and Twitter.

Q: What industries have been advertising on Snapchat?

A: The direct answer is here in a breakdown of digital video ad spend by industry and channel.

For context around how marketers are using Snapchat, here is an interview with the head of user acquisition at travel app Hopper that details how to succeed in advertising on Snapchat. He also talks a bit about using return on investment (ROI) to measure effectiveness.

For a broader look at advertising on Snapchat, including ad revenues and how ad buyers allocate digital ad spend, the “Snapchat and Twitter 2018” report is a good resource.

Q: What are some key concerns regarding platform mix that should be taken into consideration when investing in digital?

A: For social, advertisers still rely heavily on Facebook and its owned properties, but Snapchat and LinkedIn have grown their ad businesses, too. For digital video, YouTube, Roku and Hulu are the platforms that marketers should keep the closest eye on. Search is mostly controlled by Google, but Microsoft still has a presence there, and Amazon is continuing to grow.

Q: When looking at display, it would be very helpful to understand the non-Facebook display spending.

A: According to our estimates, as of 2018, Facebook makes up a little less than 40% of all display ad spending in the US. By deducting Facebook’s net ad revenues from the display equation, display grows around 2% to 3% slower than with Facebook’s estimates being included. As an example, in 2018, display advertising grew 31.3%. Without Facebook’s figures, this would have been 28.5%. While Facebook might skew the numbers a bit, the best way to consider this equation is to include Facebook, since so much of spending does occur on this platform.

Q: Which platforms are considered as key touchpoints for digital ad spend?

A: As seen in the below charts, Facebook, Google and Amazon are the three largest ad platforms in the US. They account for nearly seven in 10 US digital ad dollars.

At a more global level, the Chinese firms Alibaba, Tencent and Baidu have become increasingly important for marketers. Of course, Facebook, Google and Amazon have growing international ad businesses as well.

Q: Can you share info on the forms of media that are decreasing, and by how much as digital grows? Also, a related question: Are there any vertical-specific insights with CPG cuts, ideally by food, beverage, beauty or household? Where's the money coming from? And what about TV, print, out-of-home (OOH) net new?

We don’t have numbers for digital ad spend at the vertical-specific level. However, we do have a breakout of ad spending by media for the US health and beauty industry, which includes digital. We also have a breakout of ecommerce sales growth by product category that includes some CPG cuts including food/beverage.

This article about the success of undergarment company ThirdLove as a case study is an example of how ecommerce and digital advertising work together.

As to where the money is coming from, this breakdown of total US ad spend by media gives some insight. Overall ad spending this year is set to increase by about $15.35 billion, or 6.9%, while digital alone will see an increase of 19.1% year over year. OOH is the only other channel projected to increase, though modestly. Print (newspaper and magazine) will have the largest decrease in ad spending, and TV, radio and directories will have smaller decreases. Altogether, the data shows that there isn’t necessarily a one-to-one shift in ad spend share, but rather an increased investment in digital ad spend.

Q: Can you segment and break out healthcare (from the health and pharma category) and drill down to see spending trends there? Where are healthcare buyers looking for information? Where is healthcare pushing its ad dollars to find new customers?

A: The first two questions we can address with the healthcare breakout and where users read/write reviews of healthcare providers.

Q: Any info on B2B consumables’ digital ad spending?

A: We don’t have B2B category breakdowns for digital ad spend. But here is a report and a forecast about general B2B digital ad trends.

Q: What is the percent of ad spending on programmatic?

A: We do not currently forecast programmatic spend by industry. However, we anticipate that 84.9% of all US digital display ad dollars will transact programmatically this year.

Q: How is the growing threat of government regulation likely to impact spending in the technology sector?

A: At a time when calls for government regulation of tech companies is increasing, the largest tech companies—such as Google, Facebook and Amazon—have invested more in marketing. As tech companies face more regulatory pressure, it is possible they will spend more on advertising to push their messages to consumers.

Q: How does digital ad spend by vertical break down by country? How similar is digital ad spend by vertical across developed (US, UK, DE, CA, FR, JP) and developing (IN, ID, SEAsia, LATAM) countries?

A: In the UK, retail continues to be the largest advertising share of any single sector, representing 14.7% of total digital ad spending in the country. Retail is closely followed by the automotive sector with travel in third place. Retail is one of the fastest-growing sectors due to the rapid growth of ecommerce and online grocery shopping, a segment that has more popularity in the UK than in the US. The financial services sector maintains the lowest share of spending due to heavier regulation than other sectors. CPG and retail ad spending grow somewhat faster than average as these two industries have higher-than-average investment in mobile ad spending, now the fastest-growing segment in digital ad spending in the UK. Similarly, trends in search advertising drive sectors such as retail, travel and CPG, which are skewing more heavily toward search, video and social media advertising. The automotive industry particularly is a standout sector for classifieds advertising investment, while also being a sector fond of various display advertising formats such as video and social media.

For Germany, the retail and automotive sectors account for 36.9% of the total digital ad market. Retail is also one of the fastest-growing sectors due to the rapid uptake of ecommerce shopping, which also includes online grocery shopping, a major growth category which is more prevalent online than in the US market. Paid search advertising is particularly key for the retail sector. As in many markets, financial services lag all other sectors that we evaluate, due to the presence of more stringent regulations than are required for other sectors. The CPG and retail industries exhibit rapid growth also due to an abundance of mobile ad spending, a rapidly growing category of advertising in many markets. Retail, along with travel and CPG overindex on search, video and social media advertising.

In the US, the retail industry reigns supreme, commanding 21.9% of total digital ad spending. Unlike in the UK or Germany, there are not many industries that come close to the dominance of retail. The next-closest industry is the automotive sector with 12.3%, followed by the financial services industry at 12.1% share of overall digital ad spending. Outside of the telecom industry, no other sector reaches 10% of digital ad spending. The top three industries represent 46.3% of overall digital ad spending and speak to the very large investment in consumer spending and financial services products. Given the retail industry's long-standing dominance, the sector no longer grows faster than the average for total digital ad spending. Instead, other smaller contributors grow faster than average as they catch up to the top three industries in this market.

Further context around India:

· Facebook and Google are doubling down on India by creating customized ad offerings for clients in the country and have even instituted vetting for political ads ahead of the general election this year.

· Amazon has quietly built itself a high-margin digital advertising business in India, which is closing in on revenues of nearly $100 million, about 5% of money spent online by brands in India. Amazon started building its direct advertising team in India sometime in 2015 and started evangelizing its platform to brands. The pitch is that Amazon can directly attribute sales to its advertisement because it can track user behavior on the platform.

· Amazon’s Indian rival Flipkart has also been chasing advertising dollars. Flipkart had first talked of entering advertising as a business around 2015, the same time as Amazon. The company, however, has also recently talked up its advertising business again. It claims that the Flipkart advertising platform will reach roughly $200 million in annualized sales by March 2019, about double its revenues from advertising at the end of March 2018.

· “[Over-the-top] OTT is becoming mainstream for most advertisers, much like television. Even within digital, we find that money is now flowing more into OTT as compared with social platforms,” said Uday Sodhi, executive vice president and head of digital business at Sony Pictures Networks India. “OTT is able to provide reach, viewability, brand safety and impact.” While YouTube and Facebook still account for 60% to 70% of total online video consumption in India—YouTube being the largest with 225 million subscribers as of 2018—the advertising revenues on OTT are expected to increase over the next five years. With the OTT landscape buzzing with competition and each player looking to carve a niche for itself, the growing subscriber base also means increased advertiser interest in the medium.

Q: What's the next big thing in digital advertising?

A: There are several emerging trends in digital advertising that marketers need to be prepared for. The most pertinent may be data privacy issues. The EU has already enacted data regulations, such as the General Data Protection Regulation (GDPR), which has affected marketers. And several states in the US, notably California, have their own data privacy laws coming soon. What this means for marketers is that they need to get a better grasp over how their user data is handled if they want to avoid running afoul of new and upcoming laws.

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