Improvement in the global economy, the spread of programmatic buying, and the rapid rise of mobile advertising is expected to drive global ad spend upwards over the next three years, Zenith Optimedia reports.
The international media agency, which recently bought Applied Media Logic in South Africa, said the market would continue to strengthen, with forecasts of a 5.5% increase this year, up from 3.9% in 2013. It estimates 2015 will see it rise to 5.8% and to 6.1% in 2016.
“Advertisers are gaining in confidence as the world economy returns to stable growth. They will find plenty of opportunities to generate strong returns on their advertising investment in the fast-growing digital media, but should remember that television has lost none of its power to reach large and engaged audiences,” said Steve King, ZenithOptimedia’s CEO, Worldwide.
Zenith Optimedia’s Advertising Expenditure Forecasts says the three ‘semi-quadrennial’ events – the Winter Olympics, the football World Cup, and the mid-term elections in the US – will boost ad spend, and benefit television in particular.
Closer to home, the company reported that after the Arab Spring began in December 2010, advertising markets in Middle East and North Africa were constrained by the region’s social and political turmoil, which left many advertisers cautious about attracting negative attention. Ad spend shrank 14.9% in 2011, and grew a meagre 1.4% in 2012. Confidence and activity began to recover in 2013, when adspend grew 4.7%. We forecast robust 7.1% growth in 2014, falling back to a more muted 4% to 5% annual growth in 2015 and 2016.
It gave four key indicators of the return to health of the industry.
Eurozone returns to growth
The Eurozone emerged from recession last year, and its recovery appears to be gathering pace. This has encouraged advertisers to start to commit higher budgets to the region, which has suffered a 15% drop in ad spend since the financial crisis began in 2007. Eurozone ad spend shrank 3.0% in 2013, but this was loaded towards the front of the year; by the end of the year several key media owners were reporting growth in their ad revenues. The agency now forecasts Eurozone ad spend to grow 0.7% this year, achieving its first year of growth since 2010. Finland, Italy and Greece are still shrinking, but should stabilise next year, helping the Eurozone accelerate to 1.6% growth in 2015 and 1.7% in 2016.
Television remains dominant
Television is still by some distance the dominant advertising medium, attracting 40% of spend in 2013, nearly twice that taken by the internet (21%). TV offers unparalleled capacity to build reach, and establish brand awareness and associations. Zenith forecasts television ad spend to grow 5.2% in 2014, up from 4.4% in 2013, as it gains the most of the benefits of the Winter Olympics, football World Cup and mid-term US elections.
Programmatic buying to boost internet display above search by 2015
The internet is still the fastest-growing medium by some distance. It grew 16.2% in 2013, and we forecast an average of 16% annual growth for 2014 to 2016. The fastest-growing sub-category is display, which we forecast to grow at 21% a year to 2016. Traditional display (banners and other standard formats) is growing at 16% a year, boosted by the revolution in programmatic buying, which provides agencies and advertisers with more control and better value from their trading. Social media (growing at 29% a year) and online video (23% a year) are also starting to benefit from programmatic buying, which is helping to sustain their rapid growth. The company expects internet display to overtake paid search (which is growing at 13% a year) for the first time in 2015. In 2016 it expects internet display ad spend to total US$74.4 billion, while paid search ad spend totals US$71.1 billion.
Continued growth of mobile
Mobile advertising has now truly taken off and is growing six times faster than desktop internet. The Zenith Optimedia forecast expects mobile advertising to grow by an average of 50% a year between 2013 and 2016, driven by the rapid adoption of smartphones and tablets. By contrast we forecast desktop internet advertising to grow at an average of 8% a year.
Zenith Optimedia estimates global expenditure on mobile advertising was US$13.4 billion in 2013, representing 12.9% of internet expenditure and 2.7% of advertising across all media. By 2016 we forecast this to rise to US$45.0 billion, representing 28.0% of internet expenditure and 7.6% of all expenditure. This means mobile will leapfrog radio, magazines and outdoor to become the world’s fourth-largest medium by the end of our forecast period.