At least in the West – it looks like it could be the case
A lot of questions are being asked in most developed Western countries today and a lot of introspection is being done. Who are we as a people? What are our values? Where do we want to be in 10, 20, 50 years?
And these are all valid questions. They feel they’re at a crossroads and a decision must be made as to what the future is going to look like. Or, at least, what they’d like it to look like.
But among all of these questions there is one that is rarely brought up: will we keep growing? Is growth like that which we knew in the past really going to be possible?
As a broad question concerning the entirety of the western world or even just a specific economy, it can be very difficult to answer.
However, for our industry in these countries, not only is it a relatively easy question to pose, but the answer is also becoming increasingly clear with each passing year.
It appears that our industry is entering a period of post-growth.
The huge growth that the industry has been enjoying for the last two and a half decades appears to be coming to an end. And the giant developed Anglophone countries are at the vanguard of this change. That is to say the United Kingdom and the United States.
The first of these was the birthplace of the digital marketing industry, the second its first major international expansion.
In both of these countries, the digital marketing industry is now the majority of ad spend. For the United Kingdom, it is a large majority of ad spend.
The Slowdown
Digital advertising is exiting the disruption phase, that is to say, the phase wherein the growth is enormous and the returns excellent. This period has lasted so long that the industry has simply habituated itself to double-digit growth year-over-year even in the largest and most developed economies.
This was made possible by three things:
- Continous increase in time spent online
- The transition of video consumption from TV to online
- The smartphone revolution
Further, the digital advertising industry didn’t have to carve out a market from nothing, instead, it disrupted a market that was already enormous (advertising).
The initial digital revolution was followed by the smartphone revolution and the digital video revolution.
So the digital advertising industry surfed the first wave and then enjoyed two more enormous ones in quick succession.
The industry is still surfing on the last two waves, but there are strong indications that the ride is reaching the end – at least in very developed countries.
If it weren’t for mobile, digital would be shrinking (worse than it is)
According to WARC, digital advertising is actually shrinking. As a global market, it might be post-growth – at least if you take Google and Facebook out of the equation. In fact, according to their research, the amount of money available to digital advertisers outside of this duopoly is actually predicted to decline by 7.2%.
But mobile is also reaching saturation – in the West
The mobile revolution was a large driver of growth for the digital marketing industry for a large part of the 2010s. However, this technology long ago left the luxury label behind and now having a smartphone is simply something that everyone has.
Certain observers have been reporting that the smartphone market has reached the point of near-total market saturation in large markets like the United States.
Statista puts smartphone penetration in the United States at 80.9% for 2016 and projects a total usership of 82.7% in 2020.
That is to say that smartphones have become a commodity. They’ve reached saturation – meaning that growth in smartphone ownership is now mostly a function of population growth.
While smartphone usership in terms of hours spent per day continues to increase, it is not increasing at an enormous – or even significant – rate anymore.
So as a driver for digital marketing growth (and almost all smartphone marketing falls under the banner of digital marketing), smartphone adoption can no longer be counted on – in the west.
Globally mobile advertising is projected to grow by 21.9% according to the WARC report and that is extremely impressive growth.
Even in the United States and the United Kingdom mobile continues to grow, but as smartphones reach saturation and as time per day spent on the phone reaches its maximum, this growth can’t be counted on in the long run.
But smartphone adoption elsewhere is skyrocketing.
While the United States and similar markets may be at or close to the saturation point for smartphones, certain developing countries still have a very long way to go.
This is the case namely in Sub-Saharan Africa, where the smartphone penetration is only 33%.
Online video consumption growth is slowing as well
Along with the mobile phone adoption, the transition to online video has also been the other large driver of digital marketing growth over the last ten years or so.
Again according to Statista, online video penetration among Americans will be 83.8% in 2021.
The United States
The United States is the biggest advertising market in the world. It was the first nation to truly embrace the digital revolution and the first to really adopt digital advertising.
Before the explosion of mobile internet with the smartphone and the continuing transition toward online video from tradition sources, the main driver of digital ad growth was simply cannibalizing the traditional industry.
This has already killed many a newspaper.
In 2018 digital ad spend in the United States grew by over 22.9%, according to eMarketer, the same firm predicts that this ad spending will decline to just 7.5% in 2023. By then digital will be responsible for over 66% of the total ad spend in the country.
The United Kingdom
The United Kingdom is one of the countries the furthest along in terms of digital taking over from traditional advertising sources.
As of 2019, digital ad spend makes of 66.4% of total ad spend in the United Kingdom, by 2023 that is expected to be 73.7%. While 2019 is expected to experience 11.2% growth (down from 15.9% in 2018), it is only expected to grow 8.0%. And while 8% greatly exceeds the expected GDP growth, it is still a far cry from the many consecutive years of double-digit growth that the market has come to expect.
The digital advertising market is reaching a certain level of maturity. It’s no longer disruptive, it’s the norm.
As a large and wealthy English-speaking market, the United Kingdom will obviously remain a very high-priority target for advertisers and adtech companies, it is also going to be an increasingly crowded market. Further, the fact that it is entering a post-growth phase indicates the market is going to start prioritizing efficiency.
The United Kingdom, and especially the United States, are extremely rich nations and they have very high priority citizens. These will obviously remain top-tier GEOs, but for adtech companies, where will they look if they want to maintain the high growth to which they have become accustomed.
Where does the opportunity lie?
So if the large, developed Western powers are entering a post-growth period, where is opportunity to be found?
Wealthy, western countries will likely still experience good growth, but it won’t be good relative to past growth or growth that can be found in other regions.
While mobile marketing and online video have been driving extremely intense growth in the west for an extremely long time, this is likely no longer going to be possible.
Everyone already has a phone, they already spend a ton of time on it per day, online video is popular all over the country, there is only so much that these industries can grow. There are only so many new anglophone western customers that they can attract.
The developing world is particularly attractive as the advertising market is undeveloped and the potential customers are getting richer every year and, therefore, more valuable to potential advertisers.
Southeast Asia and Sub-Saharan Africa are two regions that are expanding demographically and getting richer at the same time. Look here for very long-term growth.
However, perhaps the greatest opportunity right now is actually in Eastern Europe, due to many being in the European Union and boasting very good digital infrastructure.
Now, while the developing world and Eastern Europe are some of the biggest opportunity zones for digital advertising, the fact is that there are still high-growth opportunities in the rich West.
Opportunity in Germany
As discussed in a recent article, there is still
A good example of opportunity for large growth in developed countries is Germany. While it is an extremely advanced, Western European country with a robust tech industry, digital ad spend remains a comparatively small percentage of total German ad spend.
The German market was certainly slower on the uptake, mainly because of certain particularities (namely the fact that the German consumer is significantly more privacy-conscious and more resistant to change). But herein lies the opportunity.
By adapting digital advertising methods to the particularities of the German market, one could potentially achieve a significant degree of growth since there is simply more room to grow in the market (compared to the UK and the US).
Want to read more? We recently covered the German market in-depth here.
Opportunity is Eastern Europe
In terms of real opportunity to post strong growth numbers, ad tech firms should look to Eastern Europe first. The various nations of Eastern Europe have a number of advantages over other developing regions that make the opportunities here not only more numerous, but also more accessible and profitable.
For one thing, while they are developing economies, in terms of infrastructure and integration into the global economy, they are relatively advanced. This is largely a function of their belonging (for the most part) to the European Union.
Nations like Poland, Romania, Hungary, the Baltic states, etc. all boast well-developed digital infrastructure and increasingly wealthy populations.
Russia, too, has a population that is very active online and relatively wealthy.
In terms of total ad spend, Eastern Europe is expected to grow by 10.6% in 2019. Compared to 3.7% and 3.5% in the United States and Western Europe, respectively (down from 6% and 9.2% in 2019), Eastern Europe seems to be attracting add dollars at a very solid rate (WARC).
The West isn’t finished, just slowing down
The United States remains the ideal marketplace for most companies given its size, wealth, and linguistic homogeneity. The rest of the West (Australia, western Europe, Canada, etc.) are similarly rich and prosperous.
This means that even if their growth is relatively diminished and will no longer live up to the double-digits to which the industry is largely accustomed, they are still going to be the primary targets in terms of global digital advertising.
There are just too many easy-to-reach, extremely wealthy people all speaking the same language, in one place.
Even outside of the anglophone nations, the West remains extremely rich (even if growth is stagnating). That means that it’s going to remain a key target for advertisers. Just not a source of impressive growth.
The main drivers of growth seem to have reached their apex. The future, at least compared to the past, doesn’t look quite so rosy. Further, demographically, these rich western countries are either growing extremely slowly or even shrinking. Southeast Asia and Africa, on the other hand, are both growing in wealth and population.
Conclusion
The digital advertising industry has been growing by leaps and bounds for so long that slowing to growth that would be great in any other industry appears to be almost post-growth for this industry.
This rapid growth has been sustained by three successive revolutions in a row. The digital revolution/Web 2.0, the smartphone revolution, and then the online video revolution.
However, the digital revolution is over. Desktop usage, once the main gateway to the internet and the digital world, has been shrinking in real terms since hitting its peak in 2013. It’s projected to fall to just 37 minutes per day in 2021 (
The smartphone is transitioning from revolution to norm. Even app usage growth is pittering out, in 2018 it posted only 6% growth.
Impressive growth can still be found in
All of the major drivers of digital advertising growth are slowing down, at least in the West.
This means that to maintain the kind of high growth to which the industry has become accustomed, we’ll have to start looking outside of the traditional bastions of wealth. And that’s where real innovation happens.
Mobinner is a High-Performance Demand-Side Platform. Since 2017, we’ve been helping clients build brands, acquire customers, and drive conversions. See how Mobinner can help you bring your company to the next level.
