FILE PHOTO: A man uses a smartphone in New York City, in this picture taken November 6, 2013. REUTERS/Mike Segar/File Photo
FRANKFURT (Reuters) – Spending on digital marketing grew by 44 percent last year in the United States and Britain to $52 billion, a study has found, estimating that global outlays on such tactics are approaching $100 billion.
In contrast to placing online ads through intermediaries, digital marketing, or “martech”, has the appeal of enabling brands to target consumers directly via social media, search-engine optimization or voice-activated assistants, such as Amazon’s Alexa.
The growth in part reflects a desire to take functions in house following high-profile complaints by consumer giants Procter & Gamble <PG.N> and Unilever <UNc.AS> over fraud in online advertising.
The issue of ‘brand safety’, which can be jeopardized when ads appear next to unsuitable online content, has also frustrated marketers and encouraged them to seek greater control over how they target audiences.
“Clearly marketers are seeking to build in-house strength and are set to spend more on martech to remain competitive,” said study author Damian Ryan, a partner at UK accountancy firm Moore Stephens.
“Our research finds that this budget is coming from media spend and will have a resounding impact on the value of media-centric agencies,” he added, referring to traditional ad agencies that are struggling to adapt to the digital era.
The Moore Stephens survey, conducted with advertising and media consultancy WARC, covered 800 companies in North America, the Asia-Pacific and Europe.
It found that brands in Britain and North America spent 23 percent of their budgets on martech, up from 16 percent a year ago. And 63 percent of U.S. technology budgets were spent in-house, compared with 44 percent last year.
Tough European data protection rules that took effect in May, as well as concerns over the data practices of search giant Google and social network Facebook – the two biggest online advertising platforms – have led several players in the ad industry to merge or retrench.
“We’re at the beginning of the shakeout,” Ryan told Reuters in an interview.
The emergence of platform companies that offer a one-stop shop for marketers is another trend to watch, he said, highlighting Adobe Systems’ <ADBE.O> acquisition in May of e-commerce company Magento for $1.7 billion.
Adobe has just struck another deal, to buy business-to-business marketing software firm Marketo, for $4.75 billion.
“Fundamentally, brands don’t like to trust agencies with data. The clear trend shows that brands are seeking to take control over marketing technology,” said Ryan.
“Against that, we can see that, at the upper end where brands are spending more, they are still working with agencies.”
(Reporting by Douglas Busvine, editing by Louise Heavens)
