Digital Advertising Is on a Tear

Biggest Gains Since 2006

Ecommerce is becoming increasingly important to the overall economy, and advertising dollars are following the crowd. In the US, revenue from digital advertising skyrocketed 35% to reach $189 billion in 2021—its largest gain since 2006.

Although digital audio advertising on platforms such as podcasts and streaming music posted the largest gains at 58%, the sector represents less than 3% of total sales. A handful of large companies were the primary beneficiaries. Together, Google (GOOGL), Meta Platforms (FB), and Amazon (AMZN) grabbed about 64% of the revenue. Also cashing in are companies like DoorDash (DASH), Walmart (WMT), and CVS Health (CVS), which allow brands to advertise on their websites.

New Businesses Looking for Visibility

The opportunities to extract revenue from the online market go beyond the growth of online shopping. Another factor is the explosion of new businesses looking to gain visibility. Last year, a record 5.4 million new business applications were filed, representing a more than 20% increase from 2020. These businesses are using digital advertising to develop their client bases.

Advertisers want to be visible where the customers are, whether on social media or featured within consumer-facing businesses.

What Goes Up Must Come Down

Some market observers contend that advertising is fickle. If consumers reign in their shopping habits as inflation takes its toll, advertisers may cut their digital spending. Historically, advertising has been highly sensitive to slowing economic growth.

In the current environment, with war in Ukraine, rising inflation, ongoing supply-chain disruptions, and the ongoing threat of COVID variants, some question whether the advertising explosion can continue. US midterm elections may provide a lift, as advertisers look to buy airtime on streaming news services.

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