European digital advertising has had a challenging year thanks to GDPR, EU fines, and social media scandals. Growth in digital advertising spending is decelerating, and adtech providers are rethinking their European advertising businesses. However, the outlook seems healthier than might have been expected given the circumstances. Rather than precipitating a sharp downturn, these headwinds will negatively impact social and online display advertising growth more gradually over a longer period of time.
Social advertising is showing signs of stress thanks to GDPR, as Facebook’s European results show. Since GDPR went into effect, Facebook’s ad revenue growth has decelerated faster in Europe than in other regions. However, despite greater privacy restrictions and the multitude of scandals that have reduced trust in social media, social advertising spend growth will remain healthy: We forecast a compound annual growth rate (CAGR) of 11% from 2018 to 2023. Offsetting the headwinds are the shift to more video advertising on social networks and above-average economic growth in Eastern Europe. Marketers still prize advertising on social media for its precise targeting, large user base, and strong presence on mobile devices.
Online display advertising — i.e., all banner and video advertising outside social networks — faces even more threats from GDPR. The more open nature of online display advertising means that consent for using personal data is more difficult to obtain. Browser changes to limit third-party cookies will also make targeting more difficult, and ePrivacy regulation lurks in the distance. At the same time, online display advertising will benefit from the maturing of social advertising, which cannibalized online display during its earlier rapid growth phase. Shifts in viewing behavior away from traditional TV toward online video will also support online display advertising. Compared with social advertising, we expect online display advertising spend to grow at a more modest but still respectable CAGR of 5% from 2018 to 2023.
Marketers and vendors should not become complacent. Regulators are busy, and fines could be on the horizon. The founder and former CEO of AppNexus is skeptical that real-time bidding (RTB) will be compatible with GDPR — not a good sign given that he was one of RTB’s early pioneers. But even the UK Information Commissioner’s Office, which has called real-time bidding “intrusive and unfair,” is taking a “measured and iterative approach.” Regulation takes time. It took 39 months for the EU to penalize Google over Android antitrust violations.
For more detail on the outlook for spending on banner and video advertising across social and non-social inventory on computers and mobile devices in 25 European countries, Forrester clients who subscribe to ForecastView can access our recently published reports by clicking on the links below.