Statistics, surveys and predictions about ad rates point to a surge

An article in the Wall Street Journal this week outlining predictions about ad rates caught our eye. It suggests that many folks in the industry are expecting what we expect: a substantial jump in digital ad rates.

There is one area, however, where <intent> differs: we expect the rate rise to start sooner than do many others in the industry. Let us explain why:

The Journal article begins with an outline of how the ad market has cratered this year. There’s no surprise there. But later in the article, the Journal notes that many ad agencies expect a jump in ad rates and activity.

GroupM, the largest ad buyer in the world, “and other ad prognosticators are optimistic the ad market will return to growth in 2021, fueled partly by a surge in digital advertising,” the Journal reports. Furthermore, GroupM and research firm “MoffettNathanson said surges in digital advertising will be fueled by acceleration of e-commerce and the ability to produce more targeted and efficient results—both of which will benefit tech giants Google and Facebook.”

We agree with all of this….except for the timing. A surge in online ads will return the ad market to growth. And the ability to produce more targeted and efficient results on Google and Facebook — helping companies do that happens to be one of our core competencies — will fuel that acceleration. But we see no reason to assume this acceleration won’t begin much sooner than the new year.

On the contrary, we expect a surge in advertising rates beginning in the back-to-school season, carrying through the election, and continuing higher into the holiday shopping season. In fact, we expect that this sooner-than-others-expect surge is likely to ruin ecommerce companies that aren’t prepared.

And it seems that each day brings new evidence that a surge is building in online advertising. Consider the findings of the most recent edition of the CMO Survey by Duke University’s Fuqua School of Business. The survey shows “spend on marketing as a percentage of a company’s revenues increased to 11.4% in May” — the highest percentage seen in the survey’s history.

More importantly, the survey says a shift to digital, particularly to social media, drove the increase. “Respondents to the survey estimate that 23.2% of their budget was spent on social media in May, almost double the 13.3% in January, which was itself a relatively high number,” the survey said, noting that marketers “expect this level to be maintained over the next 12 months.”

Historically high spending levels … a surge in digital advertising … a new embrace of online shopping…and the trifecta of digital ad market booms (back-to-school, elections, holiday)…it all adds up to a perfect storm.

If you’d like to hear more of our thoughts on this, fill out the form below to subscribe to updates from <intent>. And join the free eTail Virtual Summit on Tuesday, June, 23, at 1:05 ET, when our CEO, Richard Harris, will speak on “After The Plague, Comes A Purge: When The COVID-19 Crisis Ends, Things Will Get Worse For Much Of Ecommerce.”