Marketing Spending Growth Breaks 10% For First Time In A Decade

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Annual growth in marketing spending exceeded 10 percent for the second time in the last 10 years and is anticipated to increase to over 13 percent through 2022, according to the 28th edition of the CMO Survey.

The report, which shares insights on brand trust, climate change, privacy and more, also found that marketing budgets as a percent of overall budgets rose to 11.7 percent, resetting to pre-pandemic levels while marketing budgets as a percent of revenues increased to 10.3 percent. Among the survey’s key findings include:

  • Digital marketing spending accounts for just over 57 percent of marketing budgets and is expected to grow by over 16 percent over the course of the next year.
  • Investments in digital marketing have increased across the board while investments in data analytics increased by roughly 40 percent over the last year and are now the most common marketing investment.
  • Survey respondents report the integration of customer data across all touchpoints and combining digital and offline data as the most prominent digital marketing challenges they face.
  • Just one-third of marketers surveyed reported that their company has in place specific goals related to climate change. Less than half of those marketers believe their companies are willing to make short-term financial sacrifices for climate change.
  • Companies are less likely than they were in prior years to take specific actions to reduce the negative impact of marketing-related activities on the environment.
  • Forty percent of companies are not taking any climate-related actions, either because they don’t feel customers or partners will reward such action or because some customers aren’t willing to pay more for climate-friendly offerings.
  • Over the last decade, there has been no increase in the concern over marketing’s impact on the climate.
  • Marketers expect a 75 percent increase in first-party usage over the next two years, as compared to second-party data (46 percent) and third-party data (39 percent).
  • There has been no meaningful increase in privacy concerns since 2019 as marketers label them as “moderately” concerning. This may be explained by the fact that roughly 66 percent of marketers feel that customers will stick with current brands instead of switching for the purpose of increasing privacy
  • More than 90 percent don’t believe consumers read or understand privacy disclosures. Nevertheless, marketers continue to take actions to ramp up brand trust in the face of ongoing privacy issues.

Macroeconomic Forecasts

Just under 40 percent of marketers are less optimistic about the US economy in Q2 2022 compared to the previous quarter—up from 37 percent in February 2021, the survey found. This decline is consistent with the rise of the COVID-19 Omicron variant, inflation and ongoing supply chain issues.

The report found that optimism reached almost 67 percent, which is lower than that reported in August 2021, but considerably higher than the 51 percent figure reported in June 2020.

Marketing Spending

As a portion of overall budgets, marketing budgets have returned to pre-pandemic levels at 11.8 percent. Annual growth in marketing spending surpassed 10 percent for the second time in a decade and, according to the report, is predicted to reach 13.6 percent over the next year. Digital marketing spending is also expected to increase, growing by 16.2 percent during the same time frame.

Over the course of 2022, marketing spend is predicted to increase across all categories, including brand building (11.8 percent), customer relationship management (9.5 percent), new product introductions (8.8 percent), customer experience spending (8.6 percent) and new service introductions (5.3 percent).

Marketers report customer acquisition budgets being 14.7 percent larger than customer retention budgets as companies spend roughly 7 percent more on research and development than they do on marketing.

Marketing Performance

Marketing performance surged for all tracked metrics compared to the previous 12 months. In February 2021, approximately one year into the pandemic, marketers reported a 0.3 percent revenue gain over the previous year. In February 2022, revenue gains recovered and reached about 14 percent on average.

Similarly, marketers reported a 10.7 percent increase in profits in February 2022—almost 8 percentage points higher than that reported one year prior. These growth rates point to the contention that despite its pace, business is recovering from the negative financial effects of the pandemic.

From a societal perspective, companies’ metrics haven’t changed much over the last 10 years. In February 2011, for example, marketers reported a 3.2 rating for their companies’ marketing having had a positive benefit to society. This most recent CMO Survey reported a 3.3 rating.

Customers And Channels 

Ranked as the top priority by 31.3 percent of marketers, superior product quality will be their customers’ top priority in the next year. Beyond that, excellent service (22 percent) and trusting relationships (14.3 percent) will also be prioritized. These findings are similar to those found in August 2021; though compared to February 2020, there’s now a greater emphasis on product quality—especially within the business-to-consumer sector where product quality increased as the top priority from 7.4 percent to over 39 percent.

A similar trend emerges when studying companies in the consumer packaged goods sector. Here, product quality wasn’t prioritized by any of the survey respondents in February 2020. That month, over 45 percent of those companies identified superior innovation as their customers’ top priority. Now, that figure is 10.7 percent. This trend aligns with consumer behavior of flocking to tried-and-true brand name products during their stress-induced pandemic shopping sprees—a phenomenon that caused companies to divert funding away from innovation and toward their core product lines.

Considering this new emphasis on product quality, most marketers believe their customers trust their brand above the industry average. Business-to-consumer and business-to-business service companies believe this more strongly and rated themselves as 8.2 and 8.1 out of 10, respectively.

Marketers have reported a notable reduction in the use of channel partners over the last decade—they’ve moved toward disintermediation to market alone. The companies that continue to use channel partners are consumer packaged goods companies (80 percent) and companies with over $10 billion in sales (76 percent).

Marketers Report Strong Brand Trust From Customers

Over 90 percent of companies believe that customers trust their brand more than the industry average. Of those that believe they are significantly less trusted are pharma/biotech companies – unsurprising considering the COVID-19 pandemic and issues around vaccines.

Managing Digital Marketing Returns

Investment in digital marketing activities has increased since February 2021 as it continues to be a priority for marketers.

Data analytics investments are now the highest priority, increasing from 56.5 percent in February 2021 to 77.5 percent one year later. Pointing to a stronger push toward customer-level data management and advanced customer analytics, some of the other top movers include marketing technology systems or platforms (14 percent), managing privacy issues (20.5 percent) and improving company apps (32.6 percent).

Despite these successful figures, the survey notes there’s room for improvement. Despite the fact that 60 percent of marketers continuously test and iterate their digital marketing, less than 40 percent feel they have an adequate system to track customer data and have consolidated/integrated customer data across all touchpoints. For this reason, they’re investing heavily in data analytics and martech systems.

Today, roughly one-third of all digital marketing activities are performed by external agencies. Business-to-consumer companies are most likely to use external agencies, which happens to be over 45 percent of the time.

Data Analytics Investments Skyrocket To Top Priority

Although digital marketing investments have increased across the board, data-related activities experienced the highest growth. For example, in February 2021, 56.5 percent of companies invested in data analytics. Today, that figure is 77.5 percent and includes larger companies, primarily. As data collection and purchasing becomes more complex, companies are increasing investments in efforts to analyze, store, manage and automate their data.

Current State Of Digital Marketing Practices

  • 67.2 percent of companies continuously test and iterate their digital marketing
  • 64.8 percent of marketing leaders have a good understanding of the technology roadmap and capabilities they can use to do great marketing
  • 62.1 of companies share customer information from sales, marketing, customer service and product teams across the company
  • 59 percent of companies are able to connect their digital marketing data with other intelligence they have about customers
  • 58.7 of companies have been able to link digital marketing returns to business outcomes such as incremental revenues or profits
  • 56.6 percent of marketing leaders are more collaborative with the CIO/CTO (or the equivalent technology leaders)
  • 54.1 of marketing teams have the skills and training to best use their company’s marketing systems powered by technology systems/tools

Contributions From Digital Marketing 

As expectations increase and attribution analyses evolve, perceived contributions from digital marketing have declined, according to the data. Pure-play internet companies experience the highest returns on digital marketing (5.7 out of 7) as consumer-facing companies report above-average returns (B2C product, 5.4; B2C services, 5.2). Real estate (2.8), energy (3.6) and pharma/biotech (3.9) report the weakest industry-level returns, potentially due to the planned purchase nature of their products and services.

Managing Privacy

Marketers are still concerned about third-party data. As much as 17.7 percent of marketing leaders report that they expect their companies’ use of third-party data to decrease over the next two years. The survey asked these marketers to rate their worries concerning the intersection between privacy and third-party data and found an average of a moderate 3.8 out of 7. Third-party data concerns rise dramatically as they relate to Apple offering users the option to choose which apps can access their data and Google phasing out tracking cookies on the Chrome web browser by 2023. For these reasons, marketers are being forced to learn how to extract more value from first-party data.

Just over half of marketing leaders report that protecting customer privacy falls under their job description. And over 58 percent of marketers report that their companies are taking steps to create stronger privacy strategies. Sixty-two percent of marketers believe customers will remain loyal and stay with brands as opposed to switching to others that offer more privacy protection.

Forty-five percent of marketers believe that sharing privacy notices with customers improves customers’ perception of their brand despite the fact that 95 percent of those marketers believe that customers don’t read them carefully and that over 90 percent don’t think customers comprehend the message. 

Marketers continue taking actions to ease consumers’ concerns such as promising not to sell customer information (63.1 percent), informed consent of customer data usage (58.1 percent) and investing in technology that reduces the risk of data breaches (52.2 percent).

First-Party Data

Marketers anticipate a larger increase in first-party data usage over the next two years compared to their usage of second-party data and third-party data. In August 2018, just 11.4 percent of marketers predicted a decrease in their use of third-party data. 

Today, that figure is 17.7 percent. In the wake of the changes spearheaded by Apple and Google, marketers will have to find different avenues to gather relevant user data on their own or to partner for it. As technologies evolve and allow companies to gather and interpret first-party data, CMO Survey expects this trend to continue.

Metaverse Technology And Its Implications For Business Leaders

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The metaverse has the potential to disrupt several realms from gaming to advertising to retail and so much more. But to tap into this virtual world’s full power, leaders must address its possibilities and pitfalls over the coming years and determine where it fits in with their business models. To help you do that, Deloitte has shared an overview of metaverse technology and its implications for business leaders.

What Is The Metaverse?

As Deloitte puts it, the metaverse is the term used to describe the convergence of an array of separate technologies that together will provide humanity with an immersive, three-dimensional virtual environment/platform to conduct business, interact, play and access new resources and experiences.

The metaverse, despite remaining years away from full realization and adoption, is a 30-year-old idea that has only just recently come into the spotlight and attracted considerable support and investment. Although it may have a comparable impact on the world as the internet did in the ‘90s or smartphones did at the turn of the century, it’s too early to accurately say. 

Other than a virtual space, the metaverse is characterized by two other important elements that could constitute make it the new platform with seemingly unlimited uses. First, it’ll likely include both physical and digital worlds in the user’s experience, fusing both into one. Second, it may have a native economy with digitally native assets and trade. 

Other elements of the metaverse that are already at play include immersive virtual worlds with avatars that interact, digital overlays on the physical world that provide data or commentary on what the user sees and digitally native trade and economic activity.

What’s Really At Stake Here?

  • Similar to what smartphones did to the world after the year 2000, the metaverse may prove to be a paradigm shift for consumer and enterprise behavior.
  • The metaverse could create a massive new market with an estimated commercial opportunity amounting to $13 trillion with 5 billion regular users by 2030.
  • It could rearrange the competitive landscape and displace legacy brands with new winners.

Why Now?

Several factors—including technical, social and financial—seem to be converging, which are in turn making the metaverse seem especially appealing. Deloitte says these are:

  • A cluster of maturing technologies
    • Extended reality user interface
    • Cloud and edge computing with artificial intelligence/machine learning
    • 5g and fiber optic networks
  • Incumbents’ search for growth
    • Digital market leaders and existing platforms are currently looking for new avenues to grow
  • Behavioral shifts amplified by COVID-19
    • Increasingly digitized social and work interactions
    • Rise of ecommerce and shifts in consumer preferences
  • Evolving digital economy
    • Growth of digitally native assets and supporting economic infrastructure
    • Increasing popularity of digital asset ownership, cryptocurrencies and digitally native contracts
  • Major capital investments 
    • Over $80 billion in corporate investment in the last 12 months
    • Over $10 billion in venture capital investment in 2021

How Will People Use It?

Several use cases for the metaverse exist across categories and industries, including work and learning, entertainment and experiences, retail, health and wellness, and manufacturing. 

Within work and learning today, the metaverse is being used for telecommuting, virtual collaboration and immersive professional training. Deloitte predicts emerging trends could include digital renditions of physical operations and locations and even classroom tools and fully native schools. In five or more years, we may begin to see metaverse-native and dependent companies.

Currently, we’re able to “attend” concerts, shows and sports games and even watch movies while socializing with others’ avatars. Emerging entertainment metaverse trends could include interactive sports and events and possibly even tourism. In the long-term, Deloitte predicts there will be immersive “theme park” experiences that adapt to customers’ data profiles.

And in retail, we’re seeing the metaverse’s capacity to host boutique shopping experiences and digital customer contact centers. Soon we may see data-enhanced everyday shopping for things like groceries, furniture and appliances, Deloitte notes. People may even one day be able to purchase homes and cars in the metaverse. In the long-term we can expect to see full sensory immersion in retail experiences, complete with sights, sounds, smells and more.

Where Is It Headed?

According to Deloitte, the metaverse’s evolution will likely depend on consumer response as well as the outcome of at least four key unknowns, each with its own set of questions that will have to be answered:

  • User interface
    • How user-friendly and mobile will the predominant interface be?
    • Does the interface enable seamless switching between physical and digital worlds?
  • Standardization
    • To what degree do standards and protocols converge? 
    • What is the level of interoperability among different platforms?
    • Is there a single unified economy across platforms?
    • Will digital goods purchased in one metaverse be available in another?
    • Are identities persistent across platforms?
    • Are there consistent design and programming standards?
  • Market fragmentation
    • How many market leaders will emerge and what consumer and commercial use cases do they serve?
    • How much competition is there in the market, and how does this affect innovation?
    • How much M&A/market consolidation will we see or will be allowed?
    • Do different platforms serve different use cases? For example, one dominant consumer platform and one dominant enterprise platform.
  • Governance
    • How effectively and consistently are content and conduct regulated? 
    • Are IP and digital assets reliably protected?
    • Is there strong government regulation or do platforms rely primarily on self-governance?
    • To what degree are interactions and transactions secure and trusted?
    • Is there an effective process governing tax jurisdictions and legal liability concerns?

What Leaders Can Do Today

Whether the metaverse has a future and what it might look like remains to be seen but there are four primary actions executives can take now to best prepare for the possibilities of what this potential paradigm shift could bring. Deloitte says these include:

  • Don’t underestimate the potential.
    • Design a flexible and adaptable strategy for taking your business into the metaverse, respond to new tech and shifting consumer preferences and engage a “test and learn” approach for both consumer-facing and enterprise functions.
  • Take the long view.
    • Considering the possibility that the mainstream metaverse and accompanying revenue generation may be several years away from being fully realized, take a long-term view on investments. Consider KPIs around consumer and employee engagement along with ROI. Also, consider investments in the context of broader digital transformation agendas.
  • Focus on demand and what motivates users.
    • Focus on how to create engaging experiences and captivating content—exclusive partnerships or user-generated content tools, for example. This will help you establish share and maintain a competitive edge.
  • Commit to a “responsible metaverse.”
    • Ensure your strategy can handle many complexities and risks within the metaverse. Privacy, security, accessibility and sustainability are all hot topics that consumers care about currently and will likely continue valuing in the near future. Ensure that your organization can be proactive in building a “responsible metaverse” – which will be indispensable in garnering consumer and employee trust.

Kia Launches A Branded Musical Instrument

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Kia is hoping to stimulate people’s creative juices with a new branded musical instrument leveraging pink noise and natural recordings.

To promote the Kia Instrument—a plug-in available to download on Windows or macOSX—the automaker launched a creator contest with SoundCloud inviting artists to write and record a song for a chance to soundtrack the brand’s next global ad campaign.

Kia captured natural sounds of movement including those from the Cheonggyecheon river in Korea, winds in the Sahara desert, beach waves in Scotland, and birds and rain falling in the Amazon rainforest. In collaboration with DaHouse Audio and synth builder Arthur Joly, Kia turned the sounds into an instrument that it also used to develop a new sound logo, “Kia: Movement That Inspires,” as well as welcome and goodbye sounds for its all-electric Kia EV6 vehicle.

The automaker also recruited up-and-coming artists to create a four-track album using the tool. All the tracks created followed neuroscientific parameters covering beats per minute, harmonic progressions, melodic intervals and texture, Kia said. The compositions were then lab-tested on people’s brains using EEG equipment.

In a two-minute spot detailing the behind-the-scenes of the musical instrument, Kathrine Templar Lewis, creative scientist and futurist, said:

“We found that people were more creative when they had listened to the songs… you could see increased alpha and theta power, a coherence of brainwaves seen and increased connectivity, particularly connecting the occipital and frontal parts of the brain, where our emotional control center is situated, and the areas connected to increased creativity and flow states.”

The Kia instrument features a touchpad keyboard that lets you play as you go. You can create endless patterns, save your loops, play them back in real-time and modulate the sounds with the dials. In addition, the key buttons light up when played, which offers a quick visual orientation.

Kia teamed with SoundCloud to run a creator contest promoting its new tool. To enter, fans must create an all-original song using sounds from the Kia instrument. The winning entry will take home $5,000 in cash, may have their music featured in a global Kia ad campaign and be part of SoundCloud’s marketing and video content. Kia is accepting entries now through May 10.

The activation comes as Kia and the live music and entertainment venue the Forum announced that the latter will be known as the Kia Forum, marking the first US naming rights deal for the automaker. The Kia Forum will include new outdoor and indoor signage, the installation of EV charging stations and Kia vehicle displays starting with the EV6. Also in the works is the establishment of the “Kia Club,” an exclusive hospitality lounge to delight car and music buffs.

More recently, Kia’s marketing efforts were recognized with two awards. Its “Movement That Inspires” broadcast campaign, a key component of the automaker’s new brand identity in the US, was named the 2021 Best Non-Luxury Auto Campaign by EDO and its “Times Square Takeover” for the Kia EV6 was awarded “Best Interactive Execution or Campaign” by MediaPost. 

Deloitte Digital Media Trends Survey 2022

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Deloitte’s latest digital media trends survey found that streaming video-on-demand (SVOD) services face greater pressure to attract and retain subscribers who have become more cost-conscious and savvier about their subscriptions.

Over the last 15 years, screen-based entertainment has expanded beyond TV and movies as streamers and studios struggle to attract and retain younger generations who flock to their smartphones, social media and video games for immersive experiences. Although SVOD has disrupted TV and movies, the medium itself hasn’t evolved sufficiently enough to attract the new subscribers needed to continue growing the way social media has, according to Deloitte’s findings.

Social media has evolved into a form that delivers an array of personalized content in a variety of forms. It’s also shoppable, playable, and, perhaps most attractively, free. As if social media isn’t engaging enough as is, top services are constantly generating new lines of revenue, boosting features and innovation and in turn, increasing engagement and consumer dollars.

As more major media providers launch their own streaming video services, two things have happened: competition among them has intensified and their value proposition to audiences is deteriorating.

The growth of leading SVOD services’ subscribers has slowed in the North American market—something those services may experience as they pursue the ever-maturing global markets. Meanwhile, consumers are experiencing their own challenges—as they get their entertainment through the increasingly fragmented SVOD landscape, the amount of effort and money to do so grows. For example, consumers in the US said they experience frustration when they have to manage multiple subscriptions, receive poor recommendations and lose content to other services.

And that’s when consumers churn: they cancel, or add and cancel, a paid SVOD service. The average churn rate in the US has remained consistent at about 37 percent across all paid SVOD services. In the UK, Germany, Brazil and Japan, the overall churn rate is roughly 30 percent, Deloitte found.

Despite how attracted people are to SVOD content, they often leave due to cost—especially Gen Z users. And because it costs money to acquire subscribers, losing them too quickly hinders providers’ ability to recoup acquisition costs. Nevertheless, losing them doesn’t mean it’s permanent—roughly 25 percent of US consumers and about 22 percent in the UK, Germany, Brazil and Japan have resubscribed to a previously canceled streaming video service within 12 months. Younger generations are more prone to churn and return than older generations.

Deloitte says the reasons for this phenomenon vary according to age; for some, a new season of their favorite show was released or their desired content moved to the service, and for others, a free period or discounted rate lured them back. About 25 percent of respondents to Deloitte’s survey cited cost as a consistent cause of their canceling and resubscribing. 

Many respondents that consider canceling a paid SVOD service globally report being likely to keep their subscriptions if they could get a discount. In the US, respondents considering canceling a paid SVOD service report being willing to stay if they would be offered access to first-run movies (37 percent) or a loyalty program (34 percent). For Gen Z and millennial subscribers, roughly 51 percent report being willing to stay if the subscription included a gaming or music service or an additional SVOD service.

According to the survey, watching movies and TV at home continues to be respondents’ overall favorite entertainment activity, particularly for older generations. In the US, the UK, Germany, Brazil and Japan, playing video games was rated as the favorite entertainment activity. 

Although SVOD audiences are larger than they ever have been, social, interactive and shoppable experiences are taking up more of consumers’ time and money. Retention for SVOD services is also challenged by social media and gaming. For many, social media is a form of entertainment, a way to connect with others and a source of information. 

Social media content, unlike SVOD, is bite-sized, can be very personalized, and easy to engage with for one minute or one hour. In the US, for example, nearly 80 percent of social media users report using social media at least daily and 59 percent use it several times a day. 

Roughly half of US respondents watch more user-generated content (UGC) than they did six months ago while half say they always end up taking in more UGC than they had planned to. For Gen Z consumers, that number jumps to 70 percent. Additionally, about 40 percent of US respondents, and 60 percent of Gen Z and millennials, watch more UGC than TV shows and movies on video streaming services. 

Gaming competes for screen time, too. Over 80 percent of US men and women report playing video games while 50 percent report that they have taken time away from other forms of entertainment. Half of smartphone owners say they play games on their phones daily and these figures increase for younger generations.

Gaming and music also appear to be closely linked. Roughly half of the respondents to Deloitte’s survey said they discovered new music while playing video games. Part of that discovery involves the increase in live in-game events—for example when rapper Travis Scott performed in Fortnite for tens of millions of viewers globally. 

Live in-game events offer unique opportunities for brands and performers to reach fans in countries or socioeconomic conditions that would otherwise prevent them from attending. Deloitte research found that as many as 25 percent of US gamers—particularly millennials and men—have attended an in-game event within the last year.

With large, global audiences tuning in to top gaming platforms, advertisers are working to reach and influence them by way of greater personalization. As Deloitte notes, digital clothing, skins and gestures increasingly include branded virtual goods. For example, as the metaverse becomes developed, the ability to enhance your avatar’s appearance with a pair of your favorite brand of sneakers or buy a designer purse you’ve always eyed will be a real possibility. 

On where digital media is headed, the report said:

“A major shift is underway, one that could radically recompose internets and economies . . . For now, streaming video, social media, and gaming are all very successful without full immersion, tokenized economies, and universal interoperability. But the twin engines of capital and human behavior may be moving irrevocably toward that kind of unlimited reality. Media and entertainment companies may need to collaborate more to create a future where they remain at the center.”

Digital Video Continues To Be One Of The Fastest-Growing Channels

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Over the past four years, the internet economy has grown seven times faster than the US economy and now accounts for 12 percent of the US GDP. In 2021 alone, US digital advertising experienced tremendous growth. Consumer time spent on digital media channels keeps growing and advertising spend on digital media is following—especially across digital video, digital audio, social media and search. Interactive Advertising Bureau’s (IAB) latest report breaks down the industry’s growth for the full year of 2021.

Key Findings:

  • Digital video continues to be one of the fastest-growing channels, up 50.8 percent compared to last year, with total revenues of $39.5 billion.
  • Digital audio captured the highest year-over-year growth, up 57.9 percent to $4.9 billion.
  • Social media advertising was up 39.3 percent to $57.7 billion, as consumers continue to engage with Meta platforms, Snapchat, TikTok and Twitter.
  • While search revenue grew substantially (32.8 percent) in 2021, it didn’t grow as strong as other areas, leading to a slight decrease in total revenue share (reduction of 0.8 percentage points).
  • Small business growth engine will be a key contributor to fueling ongoing digital media and marketing ecosystem acceleration.

Advertisers also looked to capitalize on opportunities to message consumers who, buoyed by government stimulus packages and a reopening economy, increased spending in 2021. The explosion of new businesses created in 2021 was undoubtedly an additional growth driver. According to the Census Bureau, 2021 saw the greatest business growth in history with 5.4 million new businesses created. Those businesses rely upon the ad-supported internet to attract new customers and provide ongoing products and services. We believe the small business growth engine will be a key contributor to fueling ongoing digital media and marketing ecosystem acceleration.

2021 Vs. 2020 Internet Advertising Revenue

Internet advertising revenue in 2021 grew by 35.4 percent YOY, surpassing expectations on Wall Street and showcasing the US internet advertising industry’s resilience post-pandemic. In 2020, internet advertising revenue increased by 12.2 percent YOY to reach $139.8 billion.

Streaming media, including digital video and digital audio, are growing faster than the overall industry. If the total internet ad revenue growth index baseline were 100, digital audio reached 164, digital video reached 144 and social reached 111, according to IAB. Search and display advertising formats experienced less than average growth rates.

Desktop Vs. Mobile Revenues

In 2021, mobile and desktop ad revenues experienced record levels, far outpacing prior years. While mobile revenue grew by 37.4 percent YOY, desktop grew by 30.7 percent YOY.

This rapid growth is the result of several factors, including:

  • The permanent shift to hybrid work environments post-pandemic along with reduced business travel and the simultaneous use of mobile and desktops.
  • Consumers spending more time with all mediums of digital media, especially mobile for online shopping.
  • The economy’s rapid recovery after COVID-19 lockdowns and restrictions.

Since 2011, overall internet advertising revenue experienced a compound annual growth rate (CAGR) of 19.6 percent, mobile saw a CAGR of 55.8 percent and desktop came in at 6.1 percent. In 2021, mobile internet ad revenue reached 135.1 billion while desktop earned $54.2 billion.

Revenue Concentration

Though the top 10 companies’ share of growth has relaxed, together they comprise 78.6 percent of digital ad revenue for a total of $148.7 billion in 2021. IAB believes that this phenomenon, coupled with the reversal of multi-year loss in share among mid-tier publishers, points to the possibility that advertising revenue among mid-tier and long-tail publishers is democratizing. In 2020, the top 10 companies comprised 78.1 percent of all internet advertising revenue and in 2019 that figure was 76.7 percent.

2021 Results By Format

Among the top formats in 2021, search (41.4 percent)—historically the most prominent format—held the highest share, followed by display (30 percent) and digital video (20.9 percent), found IAB.

In that same year, search earned $78.3 billion after a 33 percent increase from 2020, display earned $56.7 billion after a 29 percent increase and digital video earned $39.5 billion after a 51 percent increase. 

Between 2020 and 2021, digital video witnessed the greatest advertising growth with a 51 percent increase in revenue and a 2.2 percentage point gain in market size. All other formats held 7.8 percent of the market at $14.8 billion with a 40 percent increase over its 2020 figure.

Formats By Device

Among the top device formats, each grew on desktop and on mobile. In 2021, desktop revenue for search grew by 21.9 percent YOY to reach $23.5 billion, display grew by 25.4 percent YOY at $11.8 billion and digital video grew by 58.2 percent at $12.2 billion. 

In 2021, mobile revenue for search grew by 38 percent YOY to reach $54.7 billion, display grew by 29.8 percent YOY at $45 billion and digital video grew by 47.8 percent at $27.3 billion. Other revenues also experienced growth from 2020 to 2021.

Digital Video: Desktop Vs. Mobile

Overall digital video advertising revenues, including connected TV (CTV) and over-the-top (OTT), grew by 50.8 percent from $13.3 billion to $39.5 billion from 2020 to 2021. Mobile accounted for the majority of digital video revenues at $27.3 billion as desktop accounted for $12.2 billion—1 percent higher than its proportion in 2020. 

Digital Audio Desktop Vs. Mobile

Just as digital video experienced immense growth in 2021, so too did digital audio. Digital audio advertising revenues, including podcasting, increased by just under $1.8 billion between 2020 and 2021 for a YOY increase of 57.9 percent with mobile digital audio revenues driving most of the growth. Desktop digital audio revenues reached $739 million with a 23.8 percent YOY increase over 2020. 

Programmatic

Programmatic advertising revenues grew by 39 percent, or $27.8 billion, between 2020 and 2021, to reach $99 billion (excluding search). Digital video, in particular, experienced the greatest increase YOY versus other non-search advertising mediums, especially on mobile devices.

Social Media

In 2021, social media advertising revenues increased by $16.3 billion over 2020 to reach $57.7 billion. 

Advertising Revenues And Growth By Digital And Non-Digital Media

Besides magazines, all media types have seen positive advertising revenue growth since 2020—including internet advertising (35.4 percent), TV advertising (8.7 percent), terrestrial radio (12.8 percent), newspaper (3.6 percent) and B2B (46.3 percent). Of all the media types, cinema experienced the largest percentage increase between 2020 and 2021 at 61.8 percent.

2022 And Beyond

Some of the key trends IAB says industry leaders are focusing on in 2022 include:

More Dollars Flowing Into Digital

Ad monetization embedded in gaming and emerging devices and experiences like virtual reality (VR) and the metaverse are rapidly increasing and will likely provide publishers, tech companies and content creators continued opportunities to earn revenue. Another trend that may continue to drive ad investment into digital is the ongoing rise of ecommerce and smartphone shopping. In response, advertisers will seek to place their messaging where transactions are happening.

Privacy And Addressability’s Impact On Measurement And Monetization

Consumers are becoming more protective over and aware of the value of their data, and as they are, publishers and platforms are exchanging for it ad-free, ad-light or ad-heavy content experiences. As consumers migrate to these ad-free and subscription-based experiences, ad-supported streaming services’ revenues are being threatened. Advertisers are finding themselves in a predicament—either continue operating in the space where legacy models deliver expected ad content and ad loads or embark into new territory toward personalized content delivered on the consumer’s terms.

Diversity, Equity, Inclusion And Purpose

Consumers are now, more than ever, expecting brands to place diversity, equity and inclusion at the forefront of their business operations. And as advertisers respond and prioritize their needs to be purpose-driven, inclusive and authentic, their publishing partners will also have to engage in business practices and messaging that embody those values.

Jose Cuervo’s Metaverse Distillery Will Open This Summer

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One metaverse margarita coming right up. This summer, Jose Cuervo will open the first distillery on virtual platform Decentraland to quench younger consumers’ thirst for virtual experiences, limited edition products and tequila education.

In a 3D hologram rendering, a star- and purple cloud-studded night sky sets the backdrop for the turquoise Jose Tradicional Distillery, whose perimeter is dotted with agave plants. Adjacent to the distillery is a large, lighted dance floor, presumably where some of the events will take place once it opens.

To bring the “metadistillery” to life, the tequila brand has teamed with Bompas & Parr, which will dream up the distillery’s aesthetic and consumer experience. M2 Studio will create the virtual space in Decentraland and program the user experience.

According to a Drizly retail report, 2022 could be the year that tequila outsells vodka, as nearly 80 percent of retailers plan to carry more tequila this year – on par with bourbon and 40 points ahead of vodka. These findings mirror sales trends on Drizly, where over the past few years tequila’s share of spirits sales has grown by 13 percent while vodka’s share has declined by 2 percent.

As the retail and entertainment industries discern the metaverse as a strategic priority and new frontier for business—from Decentraland’s inaugural metaverse fashion week to The Sandbox’s and Warner Media Group’s music venue—the spirits market has an opportunity to ride their coattails. Buying digital ad space in concerts and events and building brand awareness by launching NFTs that can be used to customize avatars are just a few examples of how. Beer brands like Bud Light and Miller Lite have already dipped their toes into the metaverse with limited edition NFTs and virtual bars.

And soon, users’ avatars can make some money by auditioning and starring in fashion shows, music videos and animated series, providing drinks brands yet another opportunity to advertise and engage users in the metaverse.

One spirits brand is betting big on this new world. Starting with 1,056 cocktail-themed NFTs, woman-owned Vodka brand Wisher Vodka launched in the metaverse before selling at brick-and-mortar retailers. Each Wisher Vodka NFT includes a case of vodka, merchandise, limited edition wearables for Decentraland and access to metaverse events.

Acura Is Launching A Digital Showroom In Decentraland

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To promote its new 2023 Integra car, Acura is launching a digital showroom in the metaverse on March 22—making it the first automaker to do so—and its first limited edition NFT.

Running throughout March Madness, Acura’s metaverse activation will give the first 500 customers who reserve the 2023 Acura Integra the chance to claim an NFT designed by 3D artist Andreas Wannerstedt. Each Acura NFT will include the artist’s signature surreal textures and colors, which serve as an artistic representation of the latest Integra model. Reservations for the car opened on March 10.

Inside the brand’s virtual showroom, dubbed Acura of Decentraland, fans can experience the model’s features, browse Integra wearables—also created in partnership with Wannerstedt—play the Acura racing game “Beat That,” and explore other immersive rooms. Acura buffs can enter the showroom, which will open during Decentraland Fashion Week, via the microsite www.acuraverse.com. 

In addition to running NFT-focused spots on social, Acura will air the Integra campaign on broadcast TV during March Madness games on CBS, TBS, TNT and TruTv. Digital displays and takeovers on ESPN.com and CBSSports.com are also part of the mixed media campaign.

Over the last few years, Acura has made inroads with tech-driven marketing. At the 2017 Sundance Film Festival, its Mood Roads activation leveraged virtual reality to offer fans a full-sensory driving experience. Using brainwave technology, Acura tapped into drivers’ emotional, cognitive and physical inputs to create a unique environment with landscape, color and music that changed in real-time to reflect drivers’ moods.

Later that year, to showcase its 2018 TLX A-Spec car, Acura enlisted tech influencers and race car drivers for a live augmented reality (AR) driving race via Facebook Livestream.

Acura’s certainly not the first automaker to flex its metaverse marketing muscle. In September 2021, BMW launched Joytopia, a virtual world where fans could watch Coldplay perform live. The activation came in response to customers’ demands for personalized experiences in the digital space, according to Stefan Ponikva, BMW vice president brand communication and brand experience.

More recently, Mercedes-Benz debuted an NFT collection with five artists from around the world to celebrate its G-Class. Not long after, Lamborghini announced a series of five digital artworks accessible via a QR code engraved in five units of a physical object.

These Brands Are Betting Big On The Metaverse

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Global metaverse revenue opportunities on things like live events, ads, social commerce and hardware are projected to reach over $1 trillion according to JPMorgan, and $800 billion according to Bloomberg. The market for game makers and gaming hardware alone may surpass $400 billion. 

Gaming and entertainment brands, as well as some fashion labels, are paving the way for brands seeking to navigate the metaverse. Meanwhile, Google contributed almost $40 million in a private equity fund for all metaverse projects and Walmart has filed dozens of metaverse trademark requests since December 2021. And big brands like Nike, Meta and Disney are creating their own metaverse business units.

There are already 1 billion active augmented reality (AR) users worldwide, and that number will almost double by 2024. What’s more, 56 percent of influencers say they currently participate in the metaverse. As marketers continue to break through the noise facing consumers 24/7, understanding and embracing new immersive technologies can be an effective way to engage and delight audiences.

According to Harvard Business Review, brands seeking to enter the metaverse should first determine their place in it and balance the risks and rewards of entering the digital landscape. Next, they should determine whether and how much of their target audience spends time in the metaverse and adjust their approach accordingly. The metaverse may be the next iteration of how we use the internet to connect, communicate and transact so it’s also important for brands to stay in a “test-and-learn” mode and remain agile as they venture into this uncharted territory. 

Ahead, see a round-up of some of the brands that have embraced the metaverse so far—or plan to in the near future—and how they’ve navigated some of the considerations raised by HBR.

Autodesk

Autodesk developers have recently begun using its software to design and build virtual worlds for entertainment and gaming. It now features several products for the purpose of rendering 3D animation, constructing virtual buildings and creating within virtual reality (VR) and augmented reality (AR) landscapes. Revenues from this segment alone were up 10 percent year-over-year (YOY) in Q3 2021, further pointing to the possibility that Autodesk may soon be the main contender for metaverse developers.

Benetton

In the Italian fashion brand’s metaverse retail store, digital shoppers won’t buy clothes but instead participate in gaming experiences with the opportunity to accumulate QR codes, which can then be used to make purchases in Benetton’s physical stores. The brand’s Milan flagship was transformed into a mixed-media experience to tease the look and feel of the store in the metaverse, according to WWD.

ByteDance 

TikTok’s parent company is in the beta-testing phase of its own metaverse called Party Island. Though ByteDance refuses to label it a “metaverse,” conceptually Party Island is a metaverse. Users can create personal avatars, chat in a virtual world and schedule real-world events. The company spent $1.4 billion to acquire VR headset maker Pico—solidifying its entry into the metaverse space along with a number of other investments within the metaverse supply chain.

Google 

Google has started investing in the metaverse with a $39.5 million contribution to a private equity fund for all metaverse projects. Despite the failure of its AR glasses in 2014, chief executive officer Sundar Pichai has since frequently addressed the company’s ongoing interest in AR. It may even make services like YouTube and Maps available in the virtual landscape.

Gucci and Roblox

In May 2021, Gucci debuted the Gucci Garden, a two-week art installation aimed at raising brand awareness among young customers, inside Roblox. Upon entering the garden, visitors could view, try on and buy digital Gucci products to dress their blank, genderless avatars before exploring the garden’s themed rooms.

JPMorgan Chase and Decentraland

The largest bank in the US and seventh-largest in the world has recently made moves to modernize its brand by designing and launching a lounge in the blockchain-based virtual world Decentraland called The Onyx. The opening coincided with the release of its report on growth opportunities within the metaverse, which found that the metaverse’s market opportunity will reach over $1 trillion in annual revenues. It said the risk of “being left behind is worth the incremental investment needed to get started” in the race to occupy a space in the metaverse.

Meta

Few companies are boldly pushing for a metaverse future the way Meta, formerly Facebook, is. Mark Zuckerberg has shifted the company’s priority almost entirely to the metaverse and has committed a $10 billion initial investment in development, and has filed for several patents related to tech that utilizes metaverse users’ biometric data to generate what they see in the virtual landscape. The company intends on monetizing the metaverse through virtual commerce and advertising revenue streams.

Microsoft 

Microsoft aims to expand its dominance over the professional software market by integrating the Internet of Things into the metaverse, along with digital twins and mixed reality. For example, in order to troubleshoot, boost collaboration and directly interact with their product spaces, Microsoft Dynamics 365 Connected Spaces will allow professionals to recreate and visit their retail stores or factories during virtual meetings.

Additionally, the company made a substantial move into the social metaverse space in January when it announced its acquisition of Activision Blizzard for $69 billion, which would give the company access to 400 million monthly active gamers. 

Microsoft’s Xbox celebrated its 20th anniversary with a virtual 3D museum where gamers could personalize their own avatar and camera POV to immerse themselves in the franchise’s history of consoles, games and infamous mistakes.

Nvidia 

It’s no secret that the metaverse requires a monumental amount of processing power. That’s where Nvidia has a leg up in the metaverse. Chief executive Jensen Huang said that the metaverse could save money and resources while reducing waste by simulating plants, factories, power grids and other infrastructure products before they’re constructed in the real world.

Qualcomm 

Qualcomm recently announced a new partnership with Microsoft to develop new technology that facilitates consumer and enterprise adoption of AR. The company’s chief executive mentioned that its Snapdragon semiconductor products—which already power an array of augmented and VR devices, most notably Meta’s Oculus Quest—will dominate the next generation of the Internet of Things and the metaverse. 

Roblox

Founded in 2004, the online entertainment platform that allows users to develop games has roughly 47 million daily active users (including about half of American children), 9.5 million developers, its own digital currency and several unique virtual experiences. The company recently purchased Guilded, a platform designed to connect various gaming communities.

Selfridges and Pokémon

To commemorate its 25th anniversary in 2021, Pokémon partnered with Selfridges, designer Charli Cohen and Yahoo Ryot Lab, to build a virtual city called Electric/City where fans could shop for exclusive virtual and physical Pokémon merch. Visitors were able to create custom avatars, dress them and view them via AR body-tracking Snapchat Lens and share them on social media and other virtual platforms.

Shopify

The Canadian ecommerce company will play a critical role in monetizing the metaverse. It will be responsible for the digitalization of assets, currency and the ability for content creators to get paid. In 2021, it made two moves giving it a foothold into the possible commerce aspirations of the metaverse. First, it acquired the AR app Primer, which will allow users to see the effects of a purchase or project in their space firsthand—a powerful tool that’ll allow subscribers to build-out shopping experiences and stores in the metaverse. It also launched an NFT platform allowing digital creators—the first of which being the Chicago Bulls—to sell art and other content directly to consumers.

Several other companies are beginning to toy with the idea of a metaverse future by applying for trademarks. Brands like Victoria’s Secret, L’Oreal and McDonald’s and even the now-defunct Blockbuster have all filed trademark requests for online retail services featuring virtual foods, brand names, product names and more. Premier League champions Manchester City, along with its new partner Sony, is building its iconic home, Etihad Stadium, in the metaverse using Sony subsidiary Hawk-Eye’s image analysis and skeletal-tracking technology.

Innovating When You’re Already Digital-First with Quontic Bank’s Aaron Wollner

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Aaron Wollner is the CMO at Quontic Bank where he is helping lead the charge of becoming the first digital bank in the metaverse.

On the show today, Aaron and I discuss his path to become CMO, where he got his start, and how multi-variate testing and other analytical approaches led to his belief around how to be data-led in a responsible way. Later, we discuss how Quantic Bank is an adaptive digital bank and how they are pursuing banking in the metaverse.

In this episode, you’ll learn:

  • How to innovate when you’re already digital-first
  • The importance of investing in people, not technology
  • What’s worth measuring and what’s not

Key Highlights

  • [01:30] Aaron’s take on being data-driven
  • [04:00] Aaron’s path to becoming CMO
  • [06:47] What it means to be an adaptive digital bank
  • [08:02] How Quontic was born
  • [10:03] How to innovate a digital bank
  • [11:37] Scaling and growing the market
  • [14:01] Building brand guidelines
  • [15:40] Investing in people versus technology
  • [17:44] Balancing what’s worth measuring with what’s not
  • [21:42] An experience that defines Aaron
  • [24:06] Aaron’s advice to his younger self
  • [26:49] Becoming the first digital bank in the digital metaverse
  • [28:29] The brands and organizations Aaron follows
  • [30:46] The biggest threat and opportunity for marketers

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Alan B. Hart is the creator and host of “Marketing Today with Alan Hart,” a weekly podcast where he interviews leading global marketing professionals and business leaders. Alan advises leading executives and marketing teams on brand, customer experience, innovation, and growth opportunities. He has consulted with Fortune 100 companies, but he is an entrepreneur at his core, having founded or served as an executive for nine companies.

Adidas And Prada Launch Collaborative NFT Art Project

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Joining forces to tap into the virtual and augmented reality of the metaverse, Adidas and Prada have announced the launch of an NFT project that enables fans to contribute to a large-scale digital artwork and earn some money for their involvement. 

Dubbed “Adidas Originals For Prada Re-Source,” the activation invites fans to work on a digital piece inspired by Adidas’ and Prada’s new Re-Nylon collab, a collection of high-end athletic wear made in Italy with recyclable materials.

Starting January 24, anyone can register with a digital wallet and contribute an anonymous image, which the brands suggest should capture something meaningful that demonstrates what play means to them. Adidas and Prada will select 3,000 at random to mint their submission as an NFT, free of cost.

Digital artist Zach Lieberman will compile the 3,000 tiles using openFrameworks—the open-source creative code library founded by Lieberman—into a single mosaic NFT overlaid on an Adidas for Prada campaign image. The NFT will be auctioned on SuperRare from January 28.

Adidas and Prada will split the proceeds from the auction sale. Nonprofit Slow Factory will receive 80 percent, Zach Lieberman, 5 percent, and shared between all participants who created a tile (after auction fees), 15 percent.

To sign up, users must complete a verification challenge then enter an 18+ waitlist, which will determine access to the randomized raffle to receive an invitation to mint.

Prada is far from alone in venturing into this new, virtual world of luxury that promises to help win over young consumers and capture lucrative sales. Burberry set the stage when it teamed with Mythical Games to launch an NFT in their flagship title, Blankos Block Party. A few months later, Balenciaga and Fortnite created virtual clothing and accessories for avatars as well as physical merch. 

Recently, Gucci announced a collection of NFTs with Superplastic, a global toy and digital collectible company. Balmain and Barbie debuted a collaboration comprising a ready-to-wear and accessories collection and a series of exclusive NFTs, the latter marking Barbie’s first foray into the digital art space. Gap also just revealed its first collection of NFTs in partnership with artist Brandon Sines, giving customers the opportunity to own a limited edition, collectible Gap hoodie.