Pandemic narrowed online ad sales gap between tech giants and local firms

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Google headquarters in Mountain View, CA. Source: Servizi Multimediali/Flickr/Creative Commons

The arrival of the pandemic hit online advertising in Estonia hard in 2020, reversing a trend for growth in preceding years, according to a recent survey. At the same time, the latter part of the year saw some recovery in the sector, while the gap closed between tech giants like Facebook and Google and local, far smaller online advertisers in growth rates in market share.

Estonia saw the largest fall in online advertising of the three Baltic States in 2020.

On year, advertising spend via Google and Facebook as a market share rose 6 percent in 2020, according to the survey, conducted by pollsters Kantar Emor, while domestic internet advertisers saw negative growth, of -5 percent, last year.

Online advertising accounted for over a quarter of ad spend in Estonia in 2020, and was only slightly behind TV ad spend, the largest component.

While it was hard hit by the arrival of the coronavirus crisis, it also demonstrated faster recovery, not least because in the emergency situation last year, and other periods of lockdown, e-commerce as a whole took a more prominent role as many bricks-and-mortar retailers were closed or restricted.

Of the 14 largest advertising agencies over the same period, €16.2 million in advertising spend went outside Estonia, in addition to that spent on domestic firms' services, Kantar Emor says.

Of this, €9.7 million went to Google and YouTube (up 12 percent on year), while 6.5 million in advertising spend went to Facebook and Instagram (little change on year), via intermediaries, over the same period, Kantar Emor says

Smaller advertising agencies were not included in the figures, because they frequently do not publish the ad sales revenues, Kantar Emor said.

Overall internet advertising spend rose from €14.82 million to €22.44 million in 2019, while there was a slight fall in the coronavirus-hit year of 2020, to €21.33 million (see bar chart/line graph at bottom).

Google and Facebook alone saw a more substantial growth in overall spend by Estonian advertisers over that time, from €4.09 million to €16.24 million, while there was growth even between 2019 (€15.33 million) and 2020.

Meanwhile, Google and Facebook's halcyon days in terms of market share were back in 2017-2018, when the tech giants saw growth of nearly 40 percent, compared with only 6 percent in 2020 as noted.

For Estonian-based online advertisers, growth in market share fell from 16 percent in 2015, to just one percent three years later, after which growth was 11 percent in 2019, but -5 percent in 2020.

With the arrival of the coronavirus pandemic and the then-government's emergency situation declared mid-March to mid-May 2020, advertising spend online fell among the various media channels, by over 60 percent in some cases, Kantar Emor said, though the second half of 2020 showed stabilization.

The three Baltic States are often taken together as comparable markets. Overall, the online advertising market fell 15.1 percent on year to 2020, to €262.2 million.

The largest fall came in Estonia (17 percent), though this was only slightly greater than in Latvia (16.4 percent). Lithuania saw a 12.5 percent contraction in online ad spend

Estonia's market last year was worth €88.7 million, Kantar Emor said.

In previous years, the sector had grown on average 2.5 percent per annum.

Internet versus other advertising channels

TV remains the largest component of the local advertising market in Estonia, with 27 percent market share, though only slightly ahead of local online market (26.3 percent, €21.3 million).

Outdoor placard advertising came to 14.7 percent market share (€12 million), while radio ads accounted for €9.22 million advertising revenue (11.4 percent share).

Magazine advertising stood at 4.3 percent market share (€3.5 million), and direct mail advertising came to €7.67 in value.

The diagram below (in Estonian) shows the volume of spend on internet advertising overall (pink bar chart) and that devoted just to Google and Facebook (purple bar chart), 2014-2020, along with the rate of growth in market share for the tech giants Google and Facebook (blue line) and for domestic ad sales providers (green line).

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Editor: Andrew Whyte

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