By Michael J. McDermott
To the surprise of virtually no one in marketing, it appears that 2019 will be the year when spending on digital advertising finally surpasses traditional ad spending for the first time, a development that eMarketer dubs "a major milestone in the world of advertising." It projects that total digital ad spending in the U.S. will grow 19 percent, to $129.3 billion, and account for more than 54 percent of estimated total U.S. ad spending this year. Perhaps more noteworthy is the strength of this trend, with digital ads forecast to surpass two-thirds of total U.S. media spending by 2023. Marketers best buckle up.
The trend has major implications for marketers of all stripes, but the industry has seen this coming for a long time and taken steps to prepare for it. At the strategic level, many marketers no longer differentiate between "digital" and "traditional" advertising at all, choosing instead to view them simply as two tools in the same kit.
"Our spend in digital has been increasing over the years, as, indeed, has our total spend in advertising," says Keith Weed, chief marketing and communications officer at CPG giant Unilever, whose brands include Dove, Hellman's, and Lipton, among many others. Unilever now focuses on multiscreen and optimization across all types of media. "In fact, at Unilever we believe there's no such thing as digital marketing," Weed adds. "We're marketing in a digital world — end to end, everything is now digital. People refer to TV advertising as traditional, but all new TVs are digital now, and we're close to being able to target directly through them."
Maximizing Tools of the Trade
Unilever does not put digital and traditional advertising side by side and look at them as an either/or proposition. "It's all about the mix. You build an engagement plan and then use all the levers in front of you to deliver it," Weed says. "Whether they're digital or not is neither here nor there. These are just the tools of the trade around you."
Advertising decisions at Unilever, as at most brand marketers, are driven by the need to reach targeted consumers with the right message wherever they happen to be. "I'm a huge champion of digital, but only because that's where consumers are," Weed adds. "As marketers, we go where our consumers go. We fish where the fish are. People are spending more time on Facebook or Twitter or YouTube, and they need to know and love your brand wherever they are. Whether it's digital or TV, that's almost immaterial. It's not a media war, it's about where people are spending their time."
Nevertheless, while marketing's overriding goals may remain the same, digital's expanding influence means marketers have to make more agile decisions regarding where to allocate their media dollars, what types of digital products and channels to use, and how to measure campaign success. John Nitti, chief media officer at Verizon, says the company has skewed digital in its ad spending for many years and continues to lean even more in that direction for one very salient reason: "We want to meet consumers where they are, and digital is where they are most engaged."
Digital platforms provide the data that helps inform the telecom company's future media and messaging decisions. Its biggest media-spending increases have been coming in mobile and OTT (streaming) across all its products and services, but traditional advertising and experiences continue to play a critical role in its marketing strategy.
For marketing efforts that are more complex and take longer to explain — for example, driving education around 5G and other emerging technologies — traditional media channels such as print and television still play a role in Verizon's integrated communications approach, Nitti says. "However, as digital becomes more of the first and only source of consumption, we need to find ways to use those outlets to achieve the same type of storytelling," he adds.
Score One for Traditional Ad Spending
While the pattern among many marketers has been to shift their spending to digital venues and dial back traditional ad buying in recent years, the journey's been in the opposite direction for LendingTree, says Brad Wilson, CMO at the online financial marketplace. "Historically, we have invested hundreds of millions in digital ad spending," he says. "As we have diversified our offering and experienced greater than 40 percent growth on a compounded annual basis over the past five years, we now are investing heavily in more traditional ad spending channels as we look to reach a broader audience to share our brand story."
A digital-only strategy limits numerical reach and doesn't leave much of an imprint from an awareness or even a consideration perspective, Wilson adds. While LendingTree has very high aided awareness levels of greater than 90 percent, its unaided awareness levels are in the single digits. "Now, for the first time, we're trying to layer big brand-builders into what has traditionally been a direct-response category," he says.
As LendingTree has expanded beyond mortgage lending and into other financial and insurance services, it continues to increase its spending across all digital channels. It finances those increases, as well as its foray into traditional advertising, by relying on increased revenue from those new product lines rather than reallocating dollars from one channel to another. However, all its decisions stem from measurement and performance.
Mapping Brand Performance, Measuring Marketing Investments
"It's the shift to more traditional venues that is affecting the way we view our budgets and allocate our campaign results," Wilson says. LendingTree's process for mapping brand performance is built around three elements. First, it measures its investments across the response of an ad, initially when the ad first drops, then on a continuing basis whenever the ad is used again. Second, it measures the awareness and consideration and looks to draw a correlation to visitor and transaction impact over time.
The third element of the process, which Wilson says is the hardest, lengthiest, and most important for providing a broader-lens view, involves tracking household penetration by segment, writing it into a database, and using it to determine what each segment does behaviorally, from a long-term value perspective. A major challenge is assigning statistical significance to the needs and behaviors inferred from the data. "You have to make sure you're scoring it effectively over time," Wilson adds. "This is not a one-month exercise, it's a constant, ongoing endeavor."
For some marketers, however, the digital/traditional ad spending ratio is a zero-sum game. Some of the growth in digital ad spending at such companies is certainly coming from traditional ad media budgets, says Monica Peart, senior forecasting director at eMarketer, but it's also derived from other sources, such as offline marketing and trade budgets.
"Consider a CPG brand that might spend a portion of its marketing or trade budget to maintain or enhance its brand presence in the retail stores that sell its products," she says. "Increasingly, these budgets are being shifted to digital ad publishers like Amazon to advertise the brand's products there." So while more dollars are being allocated for digital spending, they're not coming directly from the traditional ad spending budget.
The Goldilocks Solution
Many marketers adopt a flexible approach when it comes to allocating ad spending between digital and traditional channels. Dun & Bradstreet, for example, typically runs at about equal distribution between the two, but media mixes vary by line of business, says Anudit Vikram, SVP of audience solutions.
"We adjust spend based on business operation models and priorities. So, as business operation models and priorities shift, our mixes may as well," he says. Funding for boosting allocation in one channel or another comes from multiple sources. Funding may come from finance or business units reallocating budgets, operational savings, or budget cuts in other parts of marketing programs. "It's not a clear-cut answer. The scenarios are unique every time," Vikram says.
An important development affecting marketing spending decisions is that the opportunity to test and learn is much greater today than it was previously, he adds. "The way that traditional channels like TV and radio are being purchased and targeted — more like digital display, these days — means more opportunity to test and learn in more controlled/measured and less costly ways," Vikram says.
Potential Impact of New Regulations
One issue looming over any discussion of digital advertising these days is what impact, if any, the expected increase of data privacy and protection regulations similar to GDPR and CCPA is likely to have on this trend. The general consensus seems to be that no matter what form it takes, marketers will adapt and digital will continue to grow.
"In the U.S., GDPR and CCPA have yet to show measurable impact on the top publishers' ad revenues," eMarketer's Peart says. "Marketers still feel greater and greater shares of their ad budgets will be better served if invested in digital channels, and this is ultimately helping digital ad spending to grow."
Jon Schulz, chief marketing officer at Viant, a Meredith Corporation-owned ad-tech company, says the specter of increased regulation is "less a wild card than a new way of life." Its main impact, he says, will be to make first-party data more important than ever. Marketers will also have to put in place opt-in consent programs and comply with existing and forthcoming regulations.
Peart stresses that as consumer attention starts to rival that of many other media types, it's a major question if any regulation can significantly disrupt the shift toward digital ad spending. "Even in the face of privacy regulation," she says, "eMarketer believes it is unlikely that consumer behavior around digital media consumption will change, and therefore marketers are unlikely to turn dollars away from this medium."