During the COVID-19 pandemic, everything “digital” stood forward to help address difficulties. As the pandemic fades, we believe the drive to digital will continue in most areas.
Global digital advertising market size to reach $1 trillion by the end of 2029
A good example is digital advertising. As traditional advertising fell during the epidemic, digital advertising grew in popularity. Global digital advertising was worth $440 billion at the end of 2021, accounting for 62 percent of the market. According to our analysis, it will expand at an annual pace of 11% over the next eight years, exceeding $1 trillion by the end of 2029, as indicated in the graph below.
Previous projections, according to our analysis, greatly underestimated the potential of digital advertising. For example, in 2014, eMarketer predicted that the market will increase to $214 billion by 2018, then to $279 billion by 2019, and then to $335 billion by 2020. In other words, in all three cases, eMarketer underestimated growth, as shown below.
Because eMarketer anticipated that internet advertising was more developed than most observers thought, actual figures exceeded expectations. In fact, eMarketer’s forecasts have consistently and significantly missed the mark on the low side of expectations over the last few years, as shown below: the market outperformed its forecasts by roughly 3% on average each year, with a particularly impressive showing last year in the face of the coronavirus crisis.
Most projections, in our opinion, continue to underestimate the growth potential of digital advertising, especially since the epidemic appears to have introduced significant tailwinds. During the pandemic, everything became more digital. In 2020, average discretionary screen time increased considerably from 2.85 hours per day[1] in 2019. The epidemic increased total adult media consumption by 60%, according to Nielsen, with the majority of it occurring online. What if the hump isn’t going away?
If online consumption rates continue to rise, digital ad spending may follow suit. We believe this transition will be similar to the transition from traditional print to digital media that occurred during the global financial crisis. Despite the growing popularity of the internet, advertisers were hesitant to invest heavily online until 2008-09. However, as traditional media sources began to fail at an increased rate during and after the crisis, ad spending began to transfer to more efficient digital media formats. The epidemic, in our opinion, generated the same dynamic.
We studied prices per hour online to better understand the relationship between time spent online and advertising spend. As illustrated here, the monetization of discretionary online time was range-bound between $0.06 and $0.07 per hour from 2014 to 2019.
Despite the fact that time spent online climbed by nearly 60% during the pandemic in 2020, digital advertising only expanded by 11%, resulting in a dramatic decline in revenue per hour to around $0.04, as illustrated above. However, now that the crisis’s impact is lessening, we are optimistic that the migration of advertising revenue online will accelerate, catching up with the increased time spent online, as illustrated below. Increases in digital advertising are expected to bring the hourly monetization back to around $0.06.
As a sanity check, we mapped our advertising estimates against global GDP, assuming annual nominal GDP growth of 5%. Our forecast does not call for unprecedented advertising spending as a percentage of GDP, but rather a return to levels last seen in the early 2000s, as illustrated below.
We anticipate that, thanks to new advertising formats like short-form video, augmented reality, and virtual reality, digital advertising will continue to grab share from traditional advertising and boost the total addressable market. Digital advertising is expected to expand at a yearly rate of 11% from $440 billion in 2021 to $1 trillion in 2029 as a result of these innovations––and more we can’t fathom.
and of course following us on twitter , will be saving us Advertising spend 😉
