Zenith pegs global ad spend growth at 4.6% for 2018; digital gets lion’s share

Zenith predicts that global ad expenditure will grow 4.6 per cent in 2018, reaching US$579 billion by the end of the year, in its Advertising Expenditure Forecasts - March 2018. This forecast is substantially ahead of the 4.1 per cent growth rate that Zenith had forecast in December 2017, and is its biggest quarterly upgrade since March 2011. Several markets have surprised on the upside, most notably China, the Philippines, Argentina and Ireland. However, Zenith expects advertising expenditure to grow more slowly than the global economy as a whole out to 2020. 

Zenith forecasts that advertisers will spend 40.2 per cent of their budgets on online advertising in 2018, up from 37.6 per cent in 2017. This growth in spend is part of the wider process of digital transformation, as advertisers invest in technology, data and innovation to revolutionise their relationships with consumers. 

Amid growing industry speculation about cuts to digital advertising budgets, Zenith has found no evidence that advertisers as a whole are shifting budgets away from online advertising – in fact, its share of global advertising expenditure continues to rise rapidly. 

The concerns of global advertisers about the effectiveness of some digital media investments and the safety of the digital environment have been widely reported. However, a number of Zenith’s global research projects link brand experience impact and brand growth to progressive use of digital throughout the consumer journey. 

Initial findings indicate that the fastest growing brands within categories such as communications, financial services and automotive tend to perform strongly on measures such as share of category search and website traffic; along with effective content marketing and strong performance in earned digital media. For automotive brands, for example, there’s an 89 per cent correlation between their ability to rise up the index and the traffic to their websites. For financial services brands, rising up the index has a 71 per cent correlation with the popularity of their owned content, and for communications brands it has an 81 per cent correlation with how much of their revenue they spend on advertising. 

There are also clear correlations between brands with high capabilities in marketing and media, and categories in which digital channels have high influence on the consumer journey. This suggests a positive reinforcement between the recognition of the digitisation of consumer behaviour and the positive transformation of marketing organisations. 

Globally, advertisers continue to increase the share of their budgets allocated to paid digital channels. According to the March 2018 edition of Zenith’s Advertising Expenditure Forecasts, online advertising grew by 13.7 per cent in 2017 to US$204 billion. It accounted for 37.6 per cent of global advertising expenditure in 2017, up from 34.3 per cent in 2016. This year, online advertising’s market share is expected to exceed 40 per cent globally for the first time, reaching 40.2 per cent. In 2017, online advertising already accounted for more than 55 per cent of ad spend in three markets (China, Sweden and the UK), so there is plenty of potential for further growth. By 2020, online advertising is expected to account for 44.6 per cent of global ad spends. 

However, rapid as the rise of online ad spend has been, the rise of advertising tech has been much faster. Zenith tracked the revenues of 14 listed ad tech companies between 2010 and 2016, and found that their revenues grew five times faster than online revenues over this time. Companies have also invested heavily in innovation – since 2010, companies in the OECD have increased their investment in research and development three times faster than they have increased their ad spends. 

Forecast by leading advertising markets 

The US will be the leading contributor of new ad dollars to the global market over the next three years, making up in scale what it lacks in speed. China will come second, combining large scale and rapid growth (though its growth is slowing as its scale increases). 

Between 2017 and 2020, Zenith forecasts global advertising expenditure to increase by US$77 billion in total. The US will contribute 26 per cent of this extra ad expenditure and China will contribute 22 per cent, followed by Indonesia, India, the UK and Japan, which will contribute 4 per cent each. 

Seven of the ten largest contributors will be the Rising Markets (China, Indonesia, India, Philippines, Brazil, Russia and South Korea), and between them they will contribute 40 per cent of new ad spend over the next three years. Overall, Zenith forecasts Rising Markets to contribute 57 per cent of additional ad expenditure between 2017 and 2020, and to increase their share of the global market from 37 to 39 per cent.

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