The advertising and marketing sector consists chiefly of companies that create advertisements, plan advertising campaigns, and handle marketing communications for their clients, as well as companies that operate out-of-home (OOH) advertising media such as billboards and transit displays. Companies of the first type often also offer additional services, such as:
- Public Relations management- It manages how information about the client is rolled out to the public.
- Talent Management – It recruits quality professionals for the client.
- Research (including surveys) & Analysis – It gathers quality information and conducts surveys.
- Customer Relationship Management – It creates a framework to interact with customers.
- Media Planning and Buying – It plans and analyzes the media property to buy, for advertising purposes.
The advertisements created by the companies in this sector may be intended for a variety of media, such as TV, print, radio, OOH, and digital platforms such as Facebook, YouTube, Instagram, etc.
While this sector was negatively impacted by the COVID-19 pandemic, businesses are returning to normalcy, and ad spending has increased too. Forecasts reveal that the global digital advertising and marketing sector (mainly consisting of players that earn significant revenue from displaying digital ads on their platforms, such as Facebook, Google, LinkedIn, etc.) will reach USD 786.2 billion by 2026. This bodes well for the advertising and marketing sector in general, as higher spending on digital advertising and marketing efforts ought to correlate with a higher outlay for advertising and marketing agencies as well. This makes the advertising and marketing sector a promising choice for your investment portfolio.
QUICK TAKEAWAYS
- Advertising and marketing companies create advertisements and run marketing campaigns for their clients.
- The advertisements created by the players in this sector may be designed for a variety of media, including TV, radio, print, billboards, and digital platforms.
- The increasing reliance of companies on digital ad platforms that allow ads to be targeted to specific profiles should indirectly benefit this sector as well.
- The growth of programmatic advertising, which involves the use of AI and machine learning to automatically bid for digital and real ad space, could have a negative impact on this sector.
- The prospects for OOH advertising (billboards, transit displays, etc.) look bright and should benefit players for whom that is a major source of revenue.
- This sector, like many others, has managed to shake off the pandemic blues and is poised to grow strongly over the near and medium-term.
STATS CORNER
GLOBAL ADVERTISING MARKET SIZE AS OF 2022
$615.2 billion
(Source)
GLOBAL DIGITAL ADVERTISING MARKET SIZE AS OF 2022
$178.29 billion
(Source)
KEY PLAYERS
[WORLDWIDE, BY MARKET CAP]
(Source | As of July 2023)
[THE UNITED STATES, BY REVENUE]
| Company name | Revenue generated | Revenue generated | Revenue generated | Revenue generated | Revenue generated |
| 2022 | 2021 | 2020 | 2019 | 2018 | |
| Omnicom Group Inc. | $14.29 B | $14.29 B | $13.17 B | $14.95 B | $15.29 B |
| IPG Inc. | $10.93 B | $10.24 B | $9.06 B | $10.22 B | $9.71 B |
| Stagwell | $2.69 B | $1.47 B | $0.89 B | $1.42 B | $1.47 B |
| Lamar Advertising Co. | $2.03 B | $1.79 B | $1.57 B | $1.75 B | $1.63 B |
| Outfront Media Inc. | $1.78 B | $1.46 B | $1.24 B | $1.78 B | $1.61 B |
(Source)
- Omnicom Group Inc. (NYSE: OMC): Its agencies are located around the world, providing services like advertising, marketing, corporate communications, public relations and brand consultancy,etc
- IPG Inc. (NYSE: IPG): It is an advertising company with five main networks that provide advertising, marketing, public relations, talent representation, and healthcare services and counts many major oil companies among its clients.
- Stagwell (NASDAQ: STGW): It is a digital-first marketing company that provides research, creative inputs, surveys, digital transformation, and communications services. It also carries out large-scale global surveys to gather actionable data.
- Lamar Advertising Co. (NASDAQ: LAMR): It is an out-of-home (OOH) media company that primarily operates billboards, logo signs, and transit displays in the United States and Canada.It has the largest network of digital billboards in the United States, with more than 3,600 displays. Moreover, in 2014, it also became a Real Estate Investment Trust (REIT).
- Outfront Media Inc. (NYSE: OUT): Outfront Media Inc: It is an out-of-home (OOH) media company that operates billboards and transit displays in the United States and Canada.
KEY DRIVERS
- The increase in digital ad spending: It has been claimed that we’re entering a golden age of digital advertising. The market is bullish about the digital advertising and marketing industry as companies increased their ad budgets by 20% in 2021. Unlike traditional ads, digital ads are more cost-effective and allow precise targeting. While smaller companies and brands are likely to use in-house departments to create ads and campaigns, medium-sized and large companies are likelier to delegate these vital tasks to specialised agencies, leading to greater revenue for the advertising and marketing sector.
- The rise in programmatic advertising: By 2023, up to 91% of total digital ad spend might be on programmatic advertising. Programmatic advertising leverages Artificial Intelligence (AI) and Machine Learning (ML) to automatically bid and purchase ad real estate (both digital and OOH) and display ads to the right person. It is popular because brands can save time and effort on biddings and negotiations, as well as purchase ad space directly without relying on media agencies. Thus, programmatic advertising will effectively cut out agencies from jobs that would normally have required them. As a result, it might serve as a damping force for the revenues (and hence the stock performance) of players in the advertising and marketing sector. How the companies adapt to this challenge will determine their long-term success.
- The rosy outlook for OOH advertising: The out-of-home (OOH) advertising market is booming: it is expected to reach a size of USD 40.42 billion by 2026, representing a CAGR of 9.1%. With digital billboards on the rise, OOH ads can now even be 4K-quality videos that tell a compelling story. Moreover, OOH ads can serve as an excellent complement to platform-based digital ads, bringing various strands together and driving the key message home on a powerful, larger-than-life canvas. The growth in OOH advertising should result in greater revenue and better stock performance for players such as Lamar Advertising and Outfront Media.
WHAT DOES THE FUTURE HOLD?
This sector may have been through a brief lull during the pandemic, but companies have been getting back to spending big money on advertising and marketing. According to eMarketer, global spend on ads will reach USD 526 billion by 2024. Ad tech companies are also working towards making the platforms more secure to adhere to compliance demands. Overall, the market experts are bullish about the sector.
An important development is the steady growth of increasingly interactive OOH advertisements. “Smart” and digital billboards can have the ability to interact with the smartphones of people who get within a certain range of them. They will also be able to integrate with upcoming technologies such as augmented reality and facial recognition to build the profiles of the people who see them. This can then make it possible to send personalised follow-ups to viewers’ smartphones.
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