LONDON – Warc, the marketing intelligence service, expects global advertising spend to rise 4.4% to $561 billion this year, following estimated growth of 3.1% in 2015. However, the rate of expansion is set to slow to +3.7% in 2017.
Increasing investment in mobile formats is set to underpin the headline growth. Warc calculates that $90 billion will be spent on mobile-specific ads worldwide in 2017, or 44% of all online ad investment. The increasing allocation of marketing budgets to mobile formats such as search ($40 billion in 2017), social ($28 billion) and video ($10 billion) mirrors the media consumption trends of the modern consumer.
The findings are released as part of Warc’s Global Adspend Outlook, a free summary of ad investment trends drawn from actual advertising expenditure across 93 markets, collected via an annual survey of monitoring organizations and ad industry bodies, and combined with broader GDP and consumer spend forecasts from the OECD and IMF.
Warc research analyst James McDonald said of the findings: “Despite an air of economic uncertainty, consumer spending will rise globally both this year and next, and with it the level of advertising investment aimed at influencing the flow.
“Further, the allocation of marketing budgets is seen to be mirroring consumer trends, particularly the rise in internet access via mobile devices and the increasing use of mobile video, social and search platforms.
“While this digital trend evolves, TV spot, an industry staple, will see record levels of investment this year as brands vie to secure ad space during major events such as the Summer Olympics and Euro 2016 football tournament.”
Mobile adspend doubles as desktop stagnates
The report finds that global advertising spend on desktop internet has stagnated at around $112 billion, and is likely to decline from this year onward. Instead, it will be mobile formats which drive growth in online advertising investment in the coming years. The forecast $90 billion spend on mobile advertisements worldwide in 2017 is a near doubling from the estimated $48 billion spent in 2015.
Social: Warc believes US advertising spend on mobile social formats surpassed $10 billion in 2015, around a fifth of all online adspend that year. Worldwide, mobile-specific social adspend will reach $28 billion by the end of 2017, approximately 31% of total mobile ad expenditure.
Video: In China, the world’s second-largest internet ad market, mobile video adspend reached RMB8.9 billion ($1.4 billion) last year, almost two and a half times more than was spent in 2014. By the end of this year, half of all online video adspend in China is likely to be mobile-specific, up from a share of just 20% in 2014. Looking globally, on the current trajectory mobile video ad expenditure will top $10 billion next year.
Search: Adspend on mobile search is rocketing, and is likely to reach $40 billion worldwide by end-2017. Should it come to pass, mobile search adspend will have near doubled from 2015 levels. This is in stark contrast to ad revenues from desktop search, which are now thought to be in decline.
The Olympic effect
Advertising revenues are to receive a boost this year due to the US presidential campaigns and the Summer Olympic and Paralympic Games.
The US, the world’s largest ad market by spend, is expected to account for a third of global adspend growth this year due to increasing ad buys around these events. The US ad market will be worth a record $175 billion this year after annual growth of 4.9% – a growth rate not seen since the last time these two major events coincided in 2012.
Much of this growth is driven by television. On a gross measure (excluding US media channels which saw an annual fall in ad investment), TV accounts for an average of 33% of annual growth during years in which these two events coincide. Warc forecasts and additional $3 billion will be spent to secure TV ad space in the US this year, pushing the annual total for the medium to a record $66.5 billion.
Regional prospects
Net adspend growth will be recorded for all regions this year and next, though the prospects within each vary considerably.
Asia-Pacific will record the fastest rate of adspend growth, rising 6.2% this year and a further 5.6% in 2017, by which time $167 billion will be spent on advertising across the region.
Despite concerns about the health of its economy, much of this regional growth will come from the world’s second-largest ad market, China. Previous research by Warc has found that 80% of the value of China’s ad market has been generated over the last decade.
North America will retain its position as the world’s largest ad region, however, worth an estimated $192 billion by end-2017. Some 93% of this total will originate from the US, which is buoyed by major sporting and political events, atop rapid investment in digital ad formats. In contrast, Canadian adspend will rise only modestly this year and next. Adspend across North America as a whole will rise 4.7% this year and 2.5% next year.
Europe, which ceded its historic position as the second-largest ad region to Asia-Pacific last year, is forecast to record adspend growth of 3.3% to $150 billion this year. The Euro 2016 football tournament in France this summer will encourage additional marketing investment across the region.
Further, adspend in Europe’s largest market, the UK, is forecast to maintain healthy growth, benefiting from strong investment in mobile formats and a resilient TV sector.
In 2017, European adspend will reach $154 billion, following annual growth of 2.9%.
Central and South America will see adspend rise 5.5% to $39 billion in 2016, however the precedes a slowdown to 4.9% growth next year.
As was the case when Brazil hosted the FIFA World Cup last year, much of the region’s growth will again come from its largest market, this time as it hosts the Summer Olympic and Paralympic Games.
Beyond this stimulus, Brazil’s ad industry is in a precarious position. The region’s largest economy has entered what could be its longest recession since the 1930s.
Elsewhere, price inflation and currency devaluation in a number of markets, atop weaker GDP growth in oil-reliant economies, creates a high degree of volatility across Latin America.
The outlook is equally testing for the Middle East and Africa, with many major economies in the region severely impacted by the fall in oil prices. Adspend growth in MEA will be flat this year, following an estimated contraction of 2.3% in 2015.
