Thanks to SPACs and VCs, the world’s biggest ad agency is growing again

“If you were spending $50 million on a direct-to-consumer program before, you’re probably going to be spending $100 million to $150 million this year,” says Christian Juhl, WPP’s GroupM chief executive. “It’s just exploding, this space.”

The advertising industry was stumbling even before the pandemic.

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The advertising industry was stumbling even before the pandemic.

Despite all the ad-targeting promise of digital media and the reach of traditional media, advertisers were finding it harder and more expensive to reach potential customers.

So when the pandemic hit, marketing departments were quick to slash ad budgets. In the spring of 2020, a quarter of media buyers said they would completely pause ad spending—a response, according to the Interactive Advertising Bureau, that was far more drastic than what the industry had experienced during the global financial crisis. That pullback hit advertising agencies’ bottom lines, including the biggest of them all, London-based WPP. During the same period, the marketing and advertising group that counts the likes of Wendy’s, Unilever, Ford, and Hennes & Mauritz (H&M) as clients, saw revenues plummet by 18.5%.

When companies resumed ad spending, one thing became clear: They were going all in on digital.

By summer 2020, digital advertising on platforms like Google, Facebook, and Alibaba had overtaken spending on traditional media for the first time ever. After a decade of double-digit growth, digital advertising accounted for a 52% share of media captured in 2020, up from 48% in 2019, according to data from GroupM. The bellwether ad-buying firm expects this figure to hit 66% by 2024.

In August, WPP reported that second-quarter revenue grew 19.3% year on yearthe highest on record, surprising even GroupM. Fueling the growth were some big client wins, and the growth in its exploding digital media, e-commerce, and marketing technology business.

And things are expected to keep growing for the industry as a whole. One forecast predicts global marketing spending will increase by $78 billion to $657 billion in 2021, again, with almost two-thirds going toward digital advertising.

Fortune spoke with Christian Juhl, WPP’s GroupM chief executive, about why he’s so bullish on the ad world as we move into the next stage of recovery from the global pandemic.

The following Q&A has been edited for brevity. 

Christian Juhl, chief executive of GroupM, WPP’s principal ad-buying agency.
Courtesy of GroupM

Fortune: Let’s start with money. What kind of spending trends do you see?

Christian Juhl: So obviously we’re in a massive rebound from 2020. What you really want to look at though is a normalized year: 2019. We’re still seeing significant growth over our 2019 numbers. So, really looking at 2020 as an anomaly, the bounce back has been even more significant, virtually across every industry.

You’re seeing a lot of post-SPAC–like companies that are going out, spending hundreds of millions in the advertising space that are kind of new to the market. That’s in addition to traditional advertisers all increasing significantly across the board. And then you’re seeing e-commerce—anybody who can build relationships with their customers—sell things directly. So it’s an exciting time, for sure. We’re really optimistic about advertising…If you were spending $50 million on a direct-to-consumer program before, you’re probably going to be spending $100 million to $150 million this year. It’s just exploding, this space.

It’s not just SPACs then.

It’s a lot of newer companies that have come into the marketplace, but also high-growth spenders that have come from small or nonexistent budgets to basically going IPO and entering the market in big ways. And it can be large-scale companies, too. I mean, look at TikTok and their own advertising, or Netflix. You know, Netflix doesn’t take ads, but they certainly buy a lot of advertising to build their brand with it.

This giant ad growth sounds reminiscent of the 1990s dotcom boom, which you worked through as well. Are you seeing similarities? Or does this time feel different?

Totally different in my mind. You look at the growth, and you see new entrants coming in. But the maturity of connectivity, the globalization at this point, the execution is so much better than it used to be. [That includes] the familiarity with platforms, and digital technology [uptake] across all demographics. It’s a whole different place than it was back when I was doing this in 1999. Connectivity is ubiquitous, and broadband is everywhere.

It is said often, but I mean [it’s true]. We’ve probably made 10 years of progress in one year due to the pandemic, and it’s just been phenomenal in terms of the way brands responded, and have been able to connect to consumers.

Another thing we hear is that “COVID-19 accelerated trends that were already there.” How is that true of the advertising world?

The tech industry itself is spending more advertising on their own brands, just to be clear. In addition, they’re spending on the large platforms that everybody writes about. So you’re seeing big winnings at Google, Facebook, Twitter, Snap, TikTok. I mean all those places that have massive viewership and massive attention.

Obviously television is still really important. It’s the largest audience we can reach at one particular time. And video is still really compelling, but there’s no denying viewership is down, and where that ends up over time is concerning for advertisers. The rise of non–ad-supported video, Netflix, Disney+— we’re going to have to figure out where the opportunity sits.

The conclusion: Your advertising is going to have to earn its place more than ever. Creativity, in the context of your media, is going to have to join up much more tightly. That’s probably where the opportunity will lie for companies like ours. It is going to be less volume-advertising, more meaningful advertising, probably more targeted. It means making your television dollars work hard across your digital dollars—all technology supported and optimized cross-channel, and cross-media—and tied much more closely to the creative message, because the platform will drive the messaging opportunity. I think that’s all really exciting for us.

How must the advertiser’s message adapt to make its investment more effective?

It has to get better and stay accurate. It must be friendly, suggestive, even helpful. Ads must earn their place with the public.

Is this growth we’re seeing in advertising sustainable? Or are we seeing signs of a bubble?

We’re seeing sustained growth. We’re seeing brands really communicating effectively with their consumers, and I think there is tremendous value being created. None of those things to me look like a huge bubble. We are seeing continued growth across the board, not wild speculation. And the advertising that we are deploying is increasingly proving more and more effective. So, for me, this all feels very sustainable.

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This story is part of Fortune’s Brandemic marketing: Going viral in the age of COVID series.