E-commerce ad spend to surge 18% amid overall decline, WARC says

Dive Brief:

  • Brands are expected to spend $58 billion on e-commerce advertising this year, according to a new WARC report. Ad spending across e-commerce sites, omnichannel retailers and social commerce platforms is projected to increase by 18.3% globally, while industry-wide ad spending will dip by 8.1%.
  • E-commcerce giant Amazon is on course to make $18.1 billion from ads this year, up by 35.6%, while the wider ad market has increased just 0.6%. In the first half of 2020, Amazon’s ad business grew 4.5 times faster than Facebook and 63 times faster than Alphabet, the report notes.
  • The increase in e-commerce ad spend comes in response to the rise in online shopping spurred by the COVID-19 pandemic. Total e-commerce sales will grow by 30.4% ($677 billion) to $2.9 trillion globally. As a result of the pandemic, shoppers are expected to spend $183 billion more online this year, per the report.

Dive Insight:

The WARC report is further evidence how the COVID-19 pandemic has changed consumer habits and accelerated the shift towards e-commerce. In kind, advertising on e-commerce sites, omnichannel retailers and social commerce platforms like Amazon, Walmart and TikTok, respectively, has increased to meet consumer demand.

Despite the jump in e-commerce ad spending, the report anticipates an overall decline in ad spending, echoing similar reports regarding the slowdown in overall ad spend. Earlier this month, the Interactive Advertising Bureau’s report said that ad execs anticipate overall ad spending will decline by 8%

“With ad investment flat or falling across most media in the wake of COVID-19, e-commerce platforms — which have seen penetration balloon — are in a strong position to capture reallocated budgets by using sales data to demonstrate ad performance amid a volatile economic climate,” James McDonald, head of data content at WARC, said in a statement.

WARC’s report also outlines which online ad platforms are gaining ground during the coronavirus pandemic. Amazon is outpacing the more mature ad markets belonging to the duopoly of Facebook and Google as demand surged due on its core e-commerce business. Amazon’s “sponsored products” ads saw an 87% yearly jump in click growth, while direct sales from the ads surged 70%. Conversion rates for those ads were about five times higher than for Google’s shopping ads in Q1, per a Merkle report.

Meanwhile, Alibaba, which is expected to earn $23.5 billion from ad sales in 2020, now oversees the third-largest ad business platform globally behind Alphabet and Facebook, the report found. Its use of livestreaming to drive e-commerce, which hasn’t quite caught on as much in the U.S., is expected to grow its sales to $171 billion this year, per the report.

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