Thanks to the global pandemic, there were long stretches of 2020 where it felt like everything was at a standstill. According to recently-released data about Google ad spend, however, that sense of stasis was momentary at best.
The numbers reveal that, while COVID-19 brought an initial drop off in digital ad spend, 2020 ultimately saw 12 percent year-over-year growth. The same figures show that the largest players in Google’s advertising ecosystem bolstered their spending and further cemented their hold on the market, commanding a larger market share than in previous years. The latest reports also show that 2021 is shaping up to be even more competitive; and, that the booming digital ads market isn’t simply a rebound from COVID.
What do these numbers show us about the digital advertising market as it stands today? And are there any takeaways for small business owners as they rethink their own Google ad budgets? Let’s take a closer look at the data and its implications.
Google Ad Spend in 2020: A Closer Look
The data reveals that, at the outset of the pandemic, ad spend dropped off quite a bit. And, in a few select industries, spending remained fairly low throughout the year. For example, there wasn’t much appetite to spend in the travel sector last year, for reasons that are probably obvious.
In the second half of the year, however, ad spending revved up considerably. There were two areas where this increase in spending was most pronounced. The first was politics. A contentious election season, including a marquee presidential race, brought huge investments in online ads. The other area was holiday shopping, specifically ad spending from retailers. Spending in these areas helped offset the drop off earlier in the year, resulting in total Google ad spending of $139.8 billion for the entire year. (Worth noting: While this figure represented year over year growth, the growth was a bit slower than it was from 2018 to 2019.)
There are a number of other factors that may help to explain why online ad spending rebounded so quickly, and despite the uncertainties posed by the pandemic. A lot of these factors pertain to shifts in consumer behavior. Consider a major increase in connected TV use, for instance. According to recent reports, cord-cutting hit record levels in 2020 and it is projected that 55% of Americans will have cut the cord by 2022. This along with big swings toward e-commerce and at-home deliveries has altered customer behaviors in a major ways. These shifts in consumer preference increased spend on search ads (PPC) as well, and opened new avenues of opportunity for advertisers.
A notable takeaway from the pandemic is that while April and May took the biggest hit in 2020, we saw advertisers, with experience marketing through a crisis, stay relatively consistent with their online advertising messaging. This was not only because it was more affordable than broadcast, but because they wanted to take advantage of the opportunity to gain share of voice knowing that it would relate to higher market share at the end of the crisis.
Still another notable takeaway from the data is that, in the second half of the year, a lot of companies simply invested the ad budget they had set aside at the beginning of the year, then paused when the pandemic hit. In other words, it was always the plan for companies to invest big in digital ads. The pandemic led to a temporary lull, but ultimately didn’t disrupt these spending plans in the long run. (This helps to explain why Q4 was especially big, with advertisers using up their ad budgets before the year ended.)
Finally, note that the 2020 data shows ad revenues increasing across different media, including big increases in search, social media advertising, digital video, programmatic advertising, and beyond.
For 2021, Google Ad Spend is Looking Even Stronger
These numbers are obviously fairly positive for Google, and more than that, they should create a real sense of optimism for the digital ad ecosystem in general. We are continuing to see real growth, even in a highly unusual year, and to see advertisers keep pace with changing consumer preferences and behaviors.
In fact, the data so far from 2021 shows that Google ad spend continues to surge. Consider a recent Wall Street Journal article, touting Google’s record-breaking sales revenues and a booming digital ads market. Specifically, the article notes that Q1 of 2021 bolstered a 34 percent increase over 2020 for Alphabet, Google’s parent company. Crucially, this increase was not solely tied to COVID, since ad spend in 2020 didn’t start to react to COVID until Q2.
What numbers like these suggest is that there is real, organic movement toward an increase in Google ad spend; the market is changing, and now is the time for all advertisers to make sure they are strategically increasing their ad budgets to remain competitive.
As you take a closer look at your ad spending and consider making any increases or adjustments, we’d be glad to help you. At enCOMPASS Agency, we provide full-scope digital advertising consultancy services for our clients, helping them assess the current advertising landscape and make prudent, effective decisions about where they need to invest. We’d love to talk with you further about what you’re trying to achieve through your own digital ad spend.
Additionally, we’re here to keep our clients informed about the ever-shifting digital landscape. We assume 2021 will show further growth and bring more and more opportunities for digital advertisers. We’ll be sure to keep you posted, but in the meantime, we’re happy to answer any questions you may have. Reach out to enCOMPASS whenever you’re ready to chat.
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