WPP’s GroupM has some good news for the digital advertising business: according to the world’s largest ad buyer, digital raked in 72 cents of every new ad dollar that was invested this year and in 2017, digital will be the beneficiary of 77 cents of every incremental ad dollar.
All told, GroupM predicts that global ad spend will top $547 billion next year, up from $524 billion this year. While television will still capture the biggest share of that 12-figure pie (41%), digital’s share will grow from 31% to 33%.
“Digital keeps surprising us,” Adam Smith, the futures director at GroupM, told AdAge’s Lindsay Stein. “What’s surprising is the bigger the appetite for digital is, the bigger it gets.”
As Stein explained, digital’s continued growth comes despite a number of issues that television executives have suggested will eventually catch up with and dent digital ads. These issues include concerns over ad fraud, viewability and the accuracy of metrics.
The bad news
While the fact that digital will see the lion’s share of each new ad dollar invested in 2017 is no doubt good news for the digital advertising economy, the beneficial effects might not be so evident to everyone. That’s because, by some estimates, Google and Facebook are capturing as much as 80% of new digital ad dollars.
The dominance exhibited by Google and Facebook has caused Kirk McDonald, president of PubMatic, to call Google and Facebook a duopoly. And McDonald expects this duopoly to “reach critical mass” in 2017. In an interview with Tobi Elkin of the RTBlog, McDonald stated:
If the share of dollars to Facebook and Google shifts further, advertisers and publishers will be forced to take actions to find alternatives and will work more aggressively to reduce their dependency on these two giants. The environments could become ad- saturated and ultimately less effective. Publishers will not be able to support their business models on even more compressed margins as they’re forced to bring down CPMs to compete for dollars.
McDonald believes that competition will heat up for the dollars that don’t go to Google or Facebook, with publishers increasing adoption of header tags, private marketplaces and programmatic direct, as well as restructuring their sales organizations to focus more heavily on programmatic. He also suggests that “the standard of measurement must be improved” so that marketers can go beyond last click attribution, which is flawed.
But McDonald also notes that Google and Facebook could be hurt by their own dominance, and raised the possibility that the ad giants could eventually offer better terms to their publisher and ad agency partners to ensure that they don’t compress their margins too heavily.