Digital growth continues but Sir Martin Sorrell is concerned

Submitted by: Ulbe Jelluma 13/09/2016

The latest estimates from ZentithOptimedia and Group M show a global growth of advertising expenditures of 4.4 per cent, resulting in a total of $539 billion advertising spend. Group M shows that 99% of this growth comes from increased internet spend. Internet will represent 31% of total expenditures in 2016.

It seems we've entered a third phase in the use of digital media. Some 10-12 years ago advertisers and their agencies saw the prospect of reaching consumers directly via the internet. Advertisers were testing this new channel with a limited part of their budget. Agencies were very enthusiastic as the internet offered a new way to express creativity and to reach and interact with consumers. Above all internet communications offered the benefit of being a lot cheaper, measurable, accountable and extremely flexible. 

After this testing, taking-the-temperature phase, came the roll-out phase also referred to as the 'digital first' phase. In the UK for example, a front runner when it comes to the use of internet-based advertising, annual growth figures from 2011 onwards were between 11 and 18%. Advertisers and their agencies were discovering what internet advertising had on offer. Technologies (QR codes, Augmented Reality) were developed to make a bridge between offline and online advertising. New types of advertising were further developed: desktop, search, display, mobile, etc. Agencies changed the way they were buying this multitude of channels, platforms and audiences by introducing programmatic buying.

However, since this year it seems that advertisers and their agencies are questioning more their internet-based advertising. This scepticism started with a comment made by Sir Martin Sorrell (CEO WPP) about the value of traditional media and particularly newspapers: "...the market will realise that they (newspapers) are more powerful than people give them credit for". He was using the words pendulum and swinging back to refer to this change of thinking.

On top of this came the concern about effectiveness with adblockers, non-human traffic and most recently the concern about measurement. Are the metrics used to measure the effectiveness of internet-based advertising correct? Google and Facebook measuring their own performance is like pupils grading themselves.

Advertising investments worldwide (Source GroupM)

The online growth figures have also stabilised in one digit figure. And recently Procter & Gamble said they went too far in targeting consumers on Facebook and consequently reduced their investments in the platform. Declining sales have made them rethink their strategy of targeting. As the P&G chief brand officer Marc Pritchard said: "We targeted too much, and we went too narrow. And now we're looking at: What is the best way to get the most reach but also the right precision". And again Sir Martin Sorrell referred to this discussion with his latest comment: " Brands are starting to question if they have over-invested in digital".

This third phase of internet-based advertising will be one where traditional channels are re-evaluated. As these channels continue to offer tried and trusted metrics, a well-known advertising opportunity and above all their important role in generating effectiveness of the media mix. This will become an interesting time for print media.