The most notable first in marketing prediction for 2021: U.S. online media spending will overtake offline channels. Also in this year of transition, data investments will rebound as brands, publishers, agencies and ad tech collaborate to deal with customer identity management, Winterberry Group’s Bruce Biegel said at DMCNY’s Annual Outlook event.

For the 14th consecutive year, Direct Marketing Club of New York members and guests received a snapshot of the U.S. media marketing landscape—and an outlook for the year ahead. As we all know, 2020 was a year unlike any other in lifetime memory, thanks to a global pandemic that disrupted life, work, leisure, and media consumption in ways no one could have anticipated. 

Annual Outlook 2021 told a story of both decimation and recovery.

Even the presentation itself—by research author Biegel, Winterberry Group’s senior managing partner—was solely a virtual event, much as our business life has become as the pandemic continues its rage. Those assembled for this year’s Annual Outlook numbered as many as the face-to-face luncheon presentations of the past 13 Annual Outlooks, except this time we were all huddled around digital screens and devices. Given what we learned about digital marketing and martech trends, appropriately so.

The pandemic did more to “tech-celerate” digital transformation than previous drivers of steady and heady business growth, even with the severe impact of mid-year spending cuts. In June 2020, DMCNY members were briefed by Biegel on the carnage of online and offline media spending cuts. 

“My most surprising result was the speed of the recovery in the second half of the year,” Biegel said. 

Overall, Biegel said, U.S. Gross Domestic Product is forecast to have fallen 3.6 percent once the government reports on 2020; but it could have declined by 10 percent based on second-quarter data, so the worst was mitigated.

Two directions: online and offline

Still, media spending did take a 10.2 percent plunge in 2020, as compared to 2019. But the declines were largely in offline media, with online media spending holding its own. Of all the offline media categories, only one—addressable television—posted growth. Total offline spending fell 22.9 percent, with radio, newspaper, outdoor, experiential, and shopper marketing all dropping by 20 percent or more. Linear TV, magazine ads, and direct mail recorded declines in the teens of percentage.

Yet online media spending grew by 8 percent, aided perhaps by a pandemic that kept people working and playing virtually all day and evening long, Biegel reported.

Digital video led all online categories, posting growth of 27.1 percent, with influencer marketing and paid social recording increases of 15.4 percent and 14.5 percent, respectively. Only three digital categories posted declines: email (-0.2 percent), digital audio (-13.4 percent), and digital out-of-home (-19.3 percent). 

These were largely diverted dollars, Biegel said: “While overall media spending growth declined, the growth in online media and marketing largely came from spending cuts in offline media. For example, digital video/OTT [over-the-top] growth came from linear TV advertising spending budgets.” 

Spending on data was essentially flat in 2020 from 2019, declining just 0.7 percent, but still exceeding $22 billion. Data spending on digital media grew by 9.5 percent, while spending on offline data fell by 10 percent. Spending on TV and email data and analytics were essentially flat.

The appetite for new investments and mergers and acquisitions also was scaled back—but there were a few trends among such business activity: the rise of performance marketing, identity management (as “traditional” digital and mobile identifiers such as third-party cookies and IDFA, identifier for advertisers, are removed by Big Tech), and strategic technology consolidations drive business transactions.

Among macro-trends as we enter 2021

Wedged between Winterberry Group’s 2020 reports and 2021 forecasts for media spending, Biegel called out key trends happening now in various sectors. Among them:

• Trust: We are in a trust and “experience” economy: 88 percent of B2B and B2C customers say that trustworthiness mattered more in 2020 than in 2019—translating to brand stickiness and higher lifetime value.
• Video: In 2020, spending on connected TV ads will surpass $8 billion and will grow to $18.29 billion by 2024. Disney+ has now overtaken Netflix as the most downloaded entertainment app: 45.2 million and 44.7 million downloads, respectively. Linear TV advertising still gets the lion’s share of TV dollars, but migration from one to the other is well underway.
• DTC and Retail: There are now 57 U.S.-based online shopping marketplaces and sales on these platforms grew by 15 percent over 2019. The top 100 global marketplaces recorded $2 trillion in sales, accounting for 95 percent of online sales. A majority of U.S. consumers (63 percent) start their online shopping journey using Amazon. Ecommerce sales now account for 20.7 percent of all retail sales and are predicted to grow share to 23.2 percent in 2021.
• Direct, CRM… Call it Performance: Performance marketing expenditures now exceed brand advertising—and two-thirds of U.S. marketers will continue shifting marketing budgets from brand to performance. Performance agencies are garnering the windfall.
• B2B, Kinda Like B2C: B2C personalization and expectations are now permeating B2B markets: 62 percent of B2B buyers are more likely to switch to vendors if current relationships are not personalized. As a result, what once was spent on tradeshows has migrated to digital marketing investments; this change is also pandemic-fueled. Experiential marketing (tradeshows, etc.) may not come back to previous levels of spending until 2025.
• Breaking Up Big Tech? Don’t hold your breath. Just 10 percent of marketers expect break-ups, though antitrust actions of other sorts may be in the offing. In the United States, privacy regulations are continuing to drive user “permissions,” though it may be Big Tech browser settings and California Consumer Protection Act (CCPA) compliance—not an omnibus federal privacy law—that inspires most data governance behaviors.

• Data Collaboration: Biegel also turned a spotlight on identity, data collaboration, and “decisioning” solutions to help keep track of prospects and customers across platforms, devices, browsers, and offline. Biegel sees a blended approach emerging to handle tech, data, and media fragmentation. Perhaps counterintuitively, spending on data has increased in the face of privacy regulations—in a bid to maintain brand-consumer connections—with just 16 percent of marketing organizations pulling back on data spending.
• Party of Seconds: Brands and publishers are likely to rely increasingly on data cooperatives, data exchanges, and marketplaces to aid with targeting, activation, and attribution. Biegel sees this as the rise of second-party data sources because first-party data alone cannot provide “whole views” and understanding of customers.

2021: a year to rebound offline and to grow even more in digital

Biegel sees offline marketing making a New Year comeback, except for linear TV, newspapers, and magazines. Overall, there will be a slight uptick of 2.3 percent, led by addressable television (38.9 percent), shopper marketing (20.1 percent), and traditional outdoor (14.5 percent). Even direct mail spend is forecast to grow by 4.8 percent—though a USPS postal rate increase for later this month will account for some of this growth.

Digital media spending will only accelerate, returning to double-digit growth rates in nearly all categories. Digital video will lead this growth; at a 40.1 percent increase, it will account for $11.4 billion in spending.

Data spending will mirror both offline and online investments, reaching a record $24.7 billion. Offline data spending (data, database, analytics, and hygiene) will reach $8.5 billion (4.8 percent growth). Email data spend will grow by 9.1 percent. TV data and analytics will reach $3.0 billion, while digital media data will garner 18.3-percent growth—hitting the $10 billion mark.

For the first time in U.S. history, ad spending online ($198.3 billion) will exceed that of offline ($175.9 billion). Just three years ago, offline media spend exceeded $232 billion, while online media spend held at $128 billion. 

If 2020 taught us anything, it’s that nothing can be taken for granted—and agility and flexibility may save marketers in 2021. Consider the U.S. marketing advertising landscape “tech-celerated.”

Please enjoy other recent coverages of DMCNY’s Annual Outlook presentation here:  Marketing Dive, MediaPost.

About the Author

Chet Dalzell has more than 25 years of public relations management and expertise in service to leading brands in consumer, donor, patient, and business-to-business markets, and in the field of integrated direct marketing. He serves on the Association of National Advertisers International ECHO Awards Board of Governors, as a board member to DMCNY, and is senior director, communications and industry relations, with the Digital Advertising Alliance. Find him on LinkedIn and Twitter.