Digital will account for three-quarters (74.4%) of all global advertising spend by 2028—and a remarkable 88.2% of Canadian ad spend by 2027—according to GroupM in a Tuesday webcast presenting findings from the latest iteration of its “This Year Next Year” report.
And while seventeen of the world’s top 25 ad sellers globally are now primarily digitally focused—led by Google and Facebook with 2022 ad revenues of US$213.1 and $119.5 respectively— retailers are also using the vast amount of customer data at their disposal to become media vendors.
RETAIL MEDIA SURGES
Five of the top 25 ad sellers are now retail media focused—led by Amazon, which sold $38.3 billion worth of advertising last year, and its Chinese counterpart Alibaba, which sold $31.3 billion of advertising.
According to GroupM, retail media advertising is expected to grow by 9.9% this year, and could account for 15.4% of total global advertising revenue within the next five years, with nearly $180 billion in total spend.
In Canada, retail media is expected to grow by 11% to $4.46 billion this year, with GroupM Canada’s VP of investment William Soraine telling listeners that it has seen 3X growth over the past five years.
While Walmart placed just outside the list of the world’s top 25 ad vendors with $2.7 billion in revenue last year, GroupM said it could find its way into the top 25 next year. In its Q1 earnings report earlier this year, the retail giant said that it saw a 30% year-over-year increase in retail advertising revenue.
“It’s a new category of media owner for us,” said Kate Scott-Dawkins, global president of GroupM’s Business Intelligence unit. “Historically it’s been mostly content publishers as media owners, and now we have retailers and commerce companies as media owners.
“It allows them to make decisions based on an entirely different business revenue model than a publisher. It’s important for us to understand the dynamics as play.”
Scott-Dawkins said that many retailers, such as Target and Tesco and Sainsbury’s in the U.K., are looking at retail media and deciding whether to make it a “pillar” of their business, like Amazon and Walmart, or those who simply view it as a “high-margin” revenue stream that complements their commerce business. “I think there are still decisions to be made among retailers as to which direction they’re going,” she said.
CANADA’S BIG EARNERS
Canada is currently the world’s seventh largest ad market, although GroupM has scaled back its previous growth projections for 2023 from 8% to 5%, with total revenues expected to reach C$26.5 billion.
Digital’s explosive growth has come largely at the expense of broadcasters, with their share of total revenues falling precipitously, from 46% in 2017, to 34% in 2022 according to SMI data. Bell was Canada’s largest seller six years ago, with ad revenue of $1.01 billion, but has since slipped to second behind Google, which attracted $1.17 billion in advertising last year.
Several other traditional media vendors, including Cineplex and the Jim Pattison Group, have been supplanted on the list of top 10 vendors by digital upstarts including Amazon (which attracted $151 million in advertising last year according to SMI, putting it sixth overall), TikTok owner ByteDance ($105 million in advertising, good for sixth overall), and Pinterest (10th overall, with $82 million in revenue).
FAST GROWTH IN CONNECTED TV
GroupM Canada’s chief investment officer, Lindsay Talbot, said that the growth of connected TV represents an opportunity for Canadian broadcasters. Several prominent Canadian broadcasters are currently dabbling in the so-called FAST (free ad-supported streaming television), including Corus Entertainment with Pluto TV, Bell Media with ad-supported tiers for Crave, and Rogers selling the ad-supported version of Disney+.
While traditional TV is expected to remain relatively flat over the next five years, GroupM is predicting Connected TV advertising to grow by 13.2% globally this year. “Streaming, connected TV is where the lion’s share of the overall TV ecosystem is shifting, and this is a great way for our broadcasters to gain back some of that share, and for us as an industry to support them,” said Talbot.
THE AI STORY
The presentation also touched on the growing importance of AI within the advertising ecosystem as part of a broader set of trends shaping the media and advertising landscape.
According to Scott-Dawkins, AI will enable or inform 50% of all global advertising revenue by the end of 2023.
That figure is not solely referring to generative AI like ChatGPT—which she said is a “small segment” of the total AI landscape—but AI-led processes such as optimization and machine-learning that are taking place primarily within the platforms themselves.
Scott-Dawkins predicted that AI-informed ad revenue will pass 90% by 2032, expanding beyond the platforms. “It is already extremely present, and will only continue to be more so going forward,” she said.
The growing use of AI could potentially create issues around factors such as transparency and trust, said Scott-Dawkins. “We’ve seen examples where images were believed to be true for a while before it turned out they were generated by AI [such the Pope’s white puffer jacket] and we’re also seeing posts where audiences are being asked more and more to be the arbiter of what is trustworthy, what is real and what is not,” she said.
“It gets into a very interesting conversation about where media dollars go in this world of user-generated content versus professionally generated content.”
—Photo by Christian Wiediger on Unsplash
