Silicon Valley may be at the heart of the global digital advertising industry, but Europe appears to be driving the industry’s path forward, at least with respect to the manner in which data is used by sellers of digital advertising, the scale at which those sellers will be allowed to operate as well as the legal status of some of the content which runs on the largest platforms. We expect ongoing efforts from governments within Europe to continue shaping the industry going forward, and those efforts will impact how advertisers trade digital media within Europe far into the future.
As I recently said at IAB Interact, the importance of digital is clear as it accounts for a greater share of advertising activity than any other medium, including television. Internet-related media now accounts for 43% of Europe’s total in 2019, up from 29% only in 2014. In 2020, the figure should rise further to 45%. Some markets are already seeing well more than 50% of advertising we track go to digital – including Denmark, the Netherlands, Norway and Sweden, while for some it is still around a third or less, including Belgium, Germany, Italy, Spain, Poland and Turkey.
For 2019 and 2020 we forecast growth of 10% and 8%, respectively, for digital advertising in Europe. However, as digital media continues to mature, its share of spending will eventually plateau. Among the region’s larger markets, we expect the fastest growth – double digits in both years – in Finland, France, Norway and Turkey, while we expect mid-single digit growth or less in both years from Austria, Belgium and Germany.
It is important to note that rather than benefitting exclusively from shifts of spending among advertisers – and some have occurred since then – much of the growth of digital has been driven by the growing numbers of distinct advertisers whose spending is skewed towards digital advertising. For example, newly established small businesses are more likely to operate nationally and internationally rather than on a purely local basis, as may have been the case in prior decades.
The emergence of internet-endemic app developers and related services as advertisers – mostly US-based, but several of which now spend more than €1bn annually around the world on advertising, skewed towards digital media – has served as a meaningful source of growth as well. While we at GroupM are sceptical that significant amounts of ad spending will shift into media from non-media sources (such as trade promotion budgets directed to e-commerce platforms), given the silos that exist within large marketers, new sources of spending could still emerge.
Other trends impacting the European market include e-commerce which is evolving differently in Europe than in the US. In grocery for example, the delivery landscape in Europe is significantly more advanced than the US. Players such as Ocado have a solid operation which allows them to deliver fresh and frozen goods and is thus a very complete offering to consumers. By comparison to their success in America, Amazon won’t have as much of a clean slate to start. Indeed, it may be why they are partnering with traditional grocers in each market who have a more compelling fresh/frozen offering and a reputation for very strong private labels (Morrisons in the UK, Monoprix in France).
Click and collect (C&C) or Bought Online, Picked-up In-Store (BOPIS) also has a significantly higher prevalence across Europe compared to the US - especially in markets like France and Belgium. C&C is the dominant model of e-commerce, especially in grocery in these markets, and so a very different proposition versus the US where this is still new and not nearly as established. The whole concept that e-commerce equates to shipped goods is not quite true as there are lots of other ways in which deliveries happen. In Belgium, Wink delivers to storage lockers in parking lots. In Germany, there's a partnership between DHL and Audi where they will deliver packages to your car. There’s also a cross-border buying trend which encourages marketer collaboration within the region to ensure pricing is not cannibalised – this is not an issue seen in the US.
Brands also need to weigh up their own appetite for risk vs reward. Although it may feel that there are limited choices, there is always a choice of alternatives depending on the required outcome. These days brand safety is a key consideration when considering risks in operating across digital media. At GroupM, we are engaged in the practice and process of brand safety and find that not only are our clients concerned about brand safety conceptually, each has a specific, legitimate perspective on the issues and their responsibility in the space. One key reality is that brand safety is not an absolute, deterministic science.
Our clients are focused on respecting consumer privacy and improving user experience to preserve the ad supported content ecosystem that provides the connection between brands and prospects, but each client (and even brand) has its own, different view of risk. Brand safety should not be the enemy of performance, and we can tailor individual client or brand programs to deliver on KPI goals while aligning risk exposure with that particular client’s sense of acceptable brand risk.
Digital platforms centred around social media can be very effective in helping marketers accomplish their goals. They are rich in data and very engaging with consumers. However, they have demonstrated that users on their platform can also be toxic, and no brand wants to be called out for implicitly supporting related content. Advertisers should identify their preferred balance of risk and reward and recognise that nothing will be 100% safe.
For marketers who feel that the tools for mitigating risks are not strong enough relative to their low tolerance, they should know there will always be alternatives. Marketers can focus on working with known publishers who curate their content or can invest more in the underlying ideas behind their campaigns. They can invest more heavily in their digital brand experience on their own properties. They can invest in digital content directly. And so on. Although it may feel that there are limited choices, there is always a choice of alternatives depending on the required outcome.
A year on from the launch of the General Data Protection Regulation (GDPR), the use of consumer data in advertising and data privacy is an ever-prevalent consideration for advertisers across Europe. Tighter rules around the use of data creates some winners and losers in terms of where spending goes, but at an aggregate level it has likely had only a modest impact so far.
Assessing the long-term impact of that policy with much precision is difficult to do because the way it will ultimately be implemented across the region will evolve as specific interpretations of the law are currently applied differently within individual countries. Eventually, a single more unified standard will likely prevail. Whatever its shape, the path forward on the primacy of consumer privacy and tighter restrictions on the use of consumer data in digital advertising seems all but assured.
Europe is leading the way in policy and regulation, probably setting the benchmark for a global standardised approach, as we have already seen from GDPR. It’s also trailblazing ahead of the US in the development of e-commerce and other new and innovative digital advertising channels. This, combined with the strong growth in digital advertising already seen and expected, puts Europe at the heart of the digital revolution. It’s an exciting time to be an advertiser in Europe – there are many new opportunities to thrive.
Dominic Grainger is CEO of GroupM Europe, Middle East and Africa.