Global advertising will rise 3.9 percent in 2014 to $513 billion, GroupM announced on Wednesday, revising its midyear forecast for 2014 global measured media spend downward from 4.5 percent growth.
The revised forecast, published in the company’s biannual worldwide media and marketing forecast report, This Year, Next Year, also projects 4.9 percent growth in global ad spend in 2015, bringing measured global ad investment to $538 billion.
In the United States,2014 growth is fractionally revised down from 3.4 percent in the company’s midyear forecast to 3.1 percent, for a total $170 billion in 2014. GroupM is looking for ad growth in the U.S. to accelerate to 3.9 percent in 2015, to $177 billion, with digital again making the dominant contribution and turning in expected growth of 17% percent.
“The world remains short of demand and uncomfortably short of inflation. However, two stabilising forces are the falling price of oil, which transfers spending power to the world's consumers, and shrinking trade surpluses, especially China's,” noted Adam Smith, GroupM Future’s Director and report editor of This Year, Next Year. “Smaller surpluses help aggregate demand. The Eurozone’s large surplus now makes it the biggest drag on world demand, and it remains the main headwind to ad growth”.
“As it relates to media,” commented Irwin Gotlieb, Global Chairman, GroupM, “the proliferation of choice is steadily increasing media consumption (and consequently supply) around the world.The effect of increased supply is a mitigation of media inflation for clients – they can achieve their objectives with minimal increases in spend, thus holding down demand. In conjunction with our improved attribution analytics, these trends are improving return on investment for our clients.”
“While growth has slowed, we see advertisers pushing for unprecedented levels of innovation that is both impactful and scalable. We believe this increase in demand for new uses of media substantially elevates the available level of learning and creativity, and will benefit the entire marketplace in the long-term,” saidDominic Proctor, President of GroupM Global.
A View of the Global AdvertisingEnvironment; Less Dependence on Faster-Growth Markets
One of the more striking features of this new forecast is the falling dependence on 'faster-growth' markets. Comprising around 44 percent of the world's economy in 2014, they are still certainly punching above their weight, and are slated to contribute 55 percentof net new ad dollars this year, and 57 percent next year – but this is down from rates in the 70s for the period 2010-2013, peaking at just under 80 percent in 2013.
The five main countries impacting ad growth in 2014, in order, are:
• China, where the forecast slows from 10 percent to eight percent and ad growth is presently trailing nominal GDP;
• Brazil, where a big World Cup and election year was a little less big than expected;
• Israel, for what we assess are geopolitical reasons;
• Nigeria, reflecting World Cup disappointment and a late start to election campaigning; and
• Russia, likely due to political reasons as well.
GroupM This Year Next Year – Add One
The principal sources of acceleration in 2015 are China, where GroupM predicts ad growth will get back on track to just under 10 percent; the US, forecast to pick up to 3.9 percent, Brazil, the U.K., Japan and India.
Brazil's nominal GDP growth has declined suddenly from 10 percent in 2013 to an annual run-rate of approximately six percent, but the country’s advertising investment continues to run ahead of these numbers (14 percent in 2014, 12 percent in 2015),as a result of persistent ad rate increases and advertiser demand in this TV-intensive market. (TV occupies 74 percent of Brazil's measured ad investment; only Pakistan and Lebanon have higher shares.)
The U.K. has been in relatively strong economic and advertising recovery since 2013. The ad market is presently driven by strong demand for traditional and on-demand TV, as well as demand for online display inventory generally. With forecast ad growth of 6.3 percent in 2014 and 5.7 percent in 2015, the U.K. leads the major mature consumer markets in projected growth.
Moderate single-digit ad growth is expected in Japan (3.2 percent forecast for 2014 and 2.6 percent for 2015), but like the US and China, Japan exerts a lot of leverage because it is the world's third-largest ad market. (US 2014 $170 billion; China $76 billion; Japan $39 billion.) Japan's ad growth is presently supported by the snap election and the probability that next October's sales-tax hike will be postponed to 2017. India, on the other hand, has staged a return to double-digit ad growth prospects amid the high hopes for the new Modi administration.
Traditional TV Share Holds Steady, Despite Digital Media’s Advance
One trend which continues is digital's growing appropriation of ad budgets. This continues to gain around two points of share every year, to stand at 24.7 percent in our new forecast for 2014, and onwards to 27.6 percent in 2015. Print media (newspapers and magazines) have lost ad share at a similar rate for many years, standing at 21 percent in 2014 and 20 percent in 2015. For the first time, our forecasts are hinting that traditional TV's share might be falling ever so slightly, riding a peak of around 43 percent for the long period 2010-2014, but now forecast to drop a point to 41.8 percent in 2015. It’s important to note,however,that this is heavily influencedby China's rapid ad migration from TV to digital and is not representative of markets worldwide. It is therefore too soon to call a more general structural change, particularly as legacy TV incumbents are generally accomplished at retrieving revenues online. However, it is a trend we will be watching, particularly in the U.S. and U.K.
The U.K. has the world's highest online share of advertising, at 47.8 percent (including paid search) in 2014, and is expected to command a 50.6 percent share in 2015. It is also unusual in that display advertising, since 2013, now taken over from paid search as the main driver of online advertising, and this lead appears to be growing wider.