By Suzanne Vranica
Advertising is coming back strong.
Companies in the U.S. are expected to spend 15% more on
advertising this year than they did in 2020, emboldened by swelling
consumer confidence and the pace of Covid-19 vaccinations.
The current rate of ad-spending growth is likely to be the
fastest in the postwar era, according to Brian Wieser, president of
business intelligence at ad buying giant GroupM, and comes as many
companies had severely cut back on marketing expenses in the early
months of the pandemic.
"We are seeing ad surges pretty much across the board as things
get back to normal. Some of the categories that were most impacted
are starting to pick up again, like travel," said Dani Benowitz,
president of U.S. for Magna Global, an ad buying arm of Interpublic
Group of Cos.
Advertising outlets aren't benefiting evenly from the
ad-spending rebound. Major players in digital advertising -- which
beyond behemoths like Google and Facebook Inc. include Snap Inc.
and Pinterest Inc. -- are getting an ever-growing share of the
advertising pie.
Tech giants reported staggering-first quarter results this week,
fueled in great part by strong digital-advertising growth.
GroupM expects TV advertising to rebound from last year --
growing 9.3% -- and newspapers and magazines to continue bringing
in fewer ad dollars every year.
Marketers say they keep shifting more money toward digital ads
because they offer better return on their investment. Beer giant
Anheuser-Busch InBev SA said it found consumers are spending more
time on digital media, particularly now that traditional TV isn't
reaching the audience sizes it used to.
Digital also allows the company to be "more flexible and
efficient," said Marcel Marcondes, U.S. marketing chief for
Anheuser-Busch.
The pandemic accelerated the shift of ad dollars to Google,
Facebook and Amazon as the trio also benefited from an increase of
new small businesses that typically rely largely on digital
ads.
GroupM had been expecting digital-advertising platforms to
capture 51% of all advertising in the U.S. this year, up from 44%
in 2019. The firm said it would likely adjust its estimate upward
because of the better-than-expected results from Alphabet Inc.'s
Google, which on Tuesday said first-quarter revenue surged 34% to
$55.31 billion.
"There is no question digital is certainly taking even more
share," Mr. Wieser said. "No one expected the numbers we saw from
Google."
The second-largest player in digital advertising, Facebook, this
week said quarterly ad-revenue rose 46%, while the third-largest,
Amazon.com Inc., saw its category that includes ads sales rise 77%
in the quarter.
Among other digital-advertising players, Snap's revenue surged
by 66% and Pinterest's by 78%.
GroupM expects U.S. ad spending to grow by 15% this year to
$250.7 billion, excluding political ad dollars. The company has
been tracking ad spending since 2000.
Ad giants such as WPP PLC and IPG are also seeing improvements
in revenue. Agencies stand to benefit as businesses look to spend
on advertising and build brand awareness as the economy reopens,
said media analyst Michael Nathanson in a note to investors
Thursday.
Anheuser-Busch, which decreased its ad spending by a
double-digit percentage in 2020, said it expected ad outlays in the
U.S. to return to pre-pandemic ad spending levels this year. "The
recovery and vaccination rates have accelerated faster than we
thought," said Mr. Marcondes. The reopening "coincides with
summertime, which is a big season for us."
Massachusetts Mutual Life Insurance Co., which cut its ad
spending by about 30% last year, is also expecting to return to
2019 ad-spending levels. "We saw consumer confidence coming back
and we are also seeing high demand for life insurance and financial
services right now," said Jennifer Halloran, MassMutual's head of
marketing.
Among the marketers hardest-hit by the pandemic, travel-booking
company Expedia Group Inc. recently kicked off a new branding
campaign. The company said it would be its largest brand-marketing
campaign in five years; it wouldn't disclose how much it will
spend.
"We are starting to advertise now for people who are feeling
comfortable traveling this summer and even for the fall," said Shiv
Singh, Expedia's senior vice president and general manager.
Despite falling viewership, TV networks are also beginning to
see ad demand strengthen.
Fox said ad spending has been strong through the start of the
year. "The demand across lots of different categories signals a
pretty healthy market," said Marianne Gambelli, president of ad
sales at Fox Corp., which shares common ownership with Wall Street
Journal parent News Corp.
Some networks haven't been able to benefit from the ad
bounceback to a larger degree because they don't have the ad
inventory to sell because of low viewership, the lack of fresh
programming and the lack of sporting events, said ad buyers and
network executives. Still, those issues are beginning to recede as
sports return to a more normal schedules and the resumption of
programming production has given networks fresh content to air.
GroupM expects newspapers and magazines to continue getting
fewer ad dollars this year. In a sign of the growing divide between
national and local publishers, several national news outlets said
they are feeling positive, thanks in part to an upswing in ads from
financial services, healthcare firms and the return of luxury ad
spending.
"We have had record-setting months in the fourth quarter and
that has continued in 2021," said Joy Robins, chief revenue officer
for the Washington Post. While the publisher doesn't disclose its
revenue, Ms. Robins said its direct ad-sales business, which makes
up the bulk of its ad revenue, was up almost 40% in the first
quarter.
"Advertisers are spending because of the optimism around
consumer spending," Ms. Robins said.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
April 30, 2021 08:22 ET (12:22 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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