Acceleration in Latin America and Central and Eastern Europe and continued gains in the Asia Pacific will result in healthy growth in global adspend revenues this year, according to new forecasts from Zenith.
The organization estimates that global ad expenditures will reach $559 billion this year, reflecting a 4.2 percent growth rate. This is lower than last year’s 4.8 percent, but Zenith notes that 2016 was a ‘quadrennial year,’ where adspend was boosted by about $6 billion from the U.S. elections, the Rio Olympic Games and the EURO tournament. Adjusting for this, Zenith says that underlying adspend growth will strengthen from 3.6 percent in 2016 to 5.4 percent in 2017.
Key factors for that growth include the recovery in Latin America and CEE. Brazil has emerged from its recession and Argentina’s economy is also improving. Zenith expects LatAm ad revenues to grow by 4.1 percent this year, following a 0.2 percent decline in 2016. CEE is expected to grow by 7.3 percent, up from last year’s 4.1 percent recovery.
Zenith also forecasts continued gains in the Asia Pacific, with the region expected to contribute 43 percent of the global growth in adspend between 2016 and 2019. This compared with 29 percent from North America, 11 percent from Western Europe, 6 percent from CEE and 4 percent from Latin America. By 2019, AsiaPac will account for 33.4 percent of global ad spend, just behind North America’s 36.3 percent.
Zenith subdivides its AsiaPac data into “Fast-track” and “Advanced,” with a separate category for Japan. China accounts for 73 percent of adspend in Fast-track Asia, and growth there is slowing. Ad expenditure in Fast-track Asia is forecast to grow 7.9 percent in 2017. Growth in Japan is expected to slow, with just a 1.9 percent gain this year after a 3 percent gain last year. Australia, New Zealand, Hong Kong, Singapore and South Korea make up what Zenith calls “Advanced Asia.” A growth rate averaging 3.1 percent per year through to 2019 is expected, better than last year’s 1.4 percent.
In Western Europe, the U.K. is seen by Zenith as dragging down the entire region as a result of a slowing economy, inflation, political uncertainty and Brexit. In the U.K., adspend is expected to grow by less than 1 percent this year, as compared with a 9.6 percent gain last year. In Western Europe as a whole, Zenith projects a 2 percent growth rate; excluding the U.K. it’s 2.4 percent.
The North American growth rate is expected to be 3.3 percent, behind last year’s 4.3 percent. MENA, meanwhile, is expected to suffer an 18.6 percent drop this year, worse than last year’s 10 percent drop. No recovery is expected in the 2016 to 2019 forecast period.
“Latin America and Central and Eastern Europe are improving, but Asia Pacific remains the main engine of global adspend growth,” said Jonathan Barnard, head of forecasting and director of global intelligence at Zenith. “China may be slowing, but it’s still growing at U.S.$5 billion a year, while India, Indonesia and the Philippines grow at double-digit rates.”
“Global advertising budgets are rising steadily but cautiously, and are falling slightly behind overall economic growth,” said Vittorio Bonori, Zenith’s global brand president. “After a decade of cost-cutting since the financial crisis, we believe brands now need to focus on topline growth. Our survey shows that brands are looking to data and technology as the main driver of business growth, closely followed by business transformation and new competitive positioning.”
From 2016 to 2019, the U.S. will remain the top contributor to adspend growth, followed by China, Indonesia, India and Japan. The Philippines, Germany, Russia, the U.K. and Mexico round out the top ten. The U.S. will also remain the largest ad market in 2019, followed by China, Japan, the U.K., Germany and Brazil. South Korea will overtake France to take seventh place by 2019, while Australia will move up to eighth, pushing France down to ninth, and Indonesia will overtake Canada to take tenth place.
The internet will overtake TV this year as the largest ad medium, taking some 37 percent of global expenditures. Television’s share is forecast to slip from 35.6 percent in 2016 to 32.6 percent in 2019. “One of the reasons for television’s loss of share is the rapid growth of paid search, which is essentially a direct response channel (together with classified), while television is the pre-eminent brand awareness channel,” Zenith said. “Television does not compete directly against search, and indeed the two can complement each other, for example by running paid search activity to take advantage of the increase in searches driven by a television campaign. Taking internet classified and search out of the picture, television will remain the principal display medium for many years to come. We estimate television accounted for 43.4 percent of display expenditure in 2016, and will attract 41.1 percent in 2019.”