India at number 4 in Top 10 contributors to global ad spend growth 2017-2020: Zenith report
Forecast is that there will be 20.4 % growth in internet advertising in India in 2018, compared to 8.4% growth for the market as a whole. By 2020, internet will account for 15.4% of total adspend in India
The December 2017 edition of Zenith’s Advertising Expenditure Forecasts was published today. For the first time Zenith has been able to demonstrate the ROI of internet adspend, not just its scale.
Amid growing debate as to whether brands are overspending on digital media, Zenith research has found that the effectiveness of internet advertising has now caught up with digital ad spends.
Until 2015, brands struggled to make effective use of internet advertising, and their spend was not matched by the resulting ‘brand experience’ (an accurate proxy of market share*). However, by 2016 internet advertising accounted for 34% of global ad budgets but produced 35% of brand experience. Internet advertising is now therefore working harder than advertising in other media.
In 2014 advertisers spent 27% of their budgets on internet advertising, which produced only 21% of brand experience. By 2015, though, brands were using internet advertising more effectively; it accounted for 30% of both budgets and paid brand experience, before tipping over in 2016, when brand experience exceeded budget share.
It is expected that internet advertising’s share of global adspend will continue to rise, reaching 40% in 2018 and 44% in 2020. Its value will rise from US$203bn in 2017 to US$225bn in 2020. The share of advertising expenditure allocated to internet advertising varies widely across the world. In the most advanced markets (Sweden and the UK) it will account for more than 60% of total expenditure next year, and it will account for between 50% and 60% in another six (Australia, Canada, China, Denmark, Norway and Taiwan).
India is placed number 4 in the Top 10 contributors to global adspend growth 2017-2020, following USA, China and Indonesia in that order.
Top ten contributors to adspend growth 2017-2020 (US$m)
Between 2017 and 2020 we forecast global advertising expenditure to increase by US$72 billion in total. The US will contribute 27% of this extra ad expenditure and China will contribute 20%, followed by Indonesia, India, the UK and Japan, which will contribute 4% each.
Five of the 10 largest contributors will be Rising Markets* (China, Indonesia, India, Brazil and Russia), and between them they will contribute 33% of new adspend over the next three years. Overall forecast is that Rising Markets will contribute 54% of additional ad expenditure between 2017 and 2020 and increase their share of the global market from 37% to 39%.
In India, internet adspend will capture 11.6% of the market in 2017. India is therefore a leading digital market/keeping pace with global developments/has a lot of scope for growth in internet advertising. Forecast is that there will be 20.4 % growth in internet advertising in India in 2018, compared to 8.4% growth for the market as a whole. By 2020, internet will account for 15.4% of total adspend in India.
The rise of the internet has had huge consequences for the other media.
Share of global adspend by medium
Since it began in the mid-1990s, internet advertising (both desktop and mobile) has principally risen at the expense of print. Over the last ten years internet advertising has risen from 9% of total global spend (in 2007) to 37% (in 2017). Meanwhile newspapers’ share of global spend has fallen from 27% to 10%, while magazines’ has fallen from 12% to 5%. Print titles will continue to lose market share as their readers continue to move to online versions of the print brands or other forms of information and entertainment entirely. Zenith report predicts that newspapers and magazines will shrink at average rates of 4% and 6% a year respectively, ending with respective 8% and 4% market shares in 2020.
Television was the dominant advertising medium between 1996 (when it overtook newspapers with a 37% market share) and 2016 (when it attracted 35% of total advertising expenditure). This year, however, the internet overtook television to become the largest advertising medium. Looking at the ad market as a whole, including search and classified, television’s share peaked at 39.3% in 2012, fell to 34.3% in 2017, and by 2020 it is expected to fall back to 31.4%, its lowest share since 1981.
Big platforms are capturing digital growth
The internet is driving the great majority of global growth in advertising – it will account for 94% of the growth in adspend between 2017 and 2020. And most of this will be captured by just five big platforms – Google and Facebook, plus the Chinese platforms Baidu, Alibaba and Tencent. Between them these five platforms increased their share of global internet adspend from 61% to 72% between 2014 and 2016, and captured 83% of the growth in internet adspend over that time. Baidu, Alibaba and Tencent accounted for 54% of the growth in internet adspend in China, while Google and Facebook accounted for 96% of the growth in internet adspend in the rest of the world. Between them Google and Facebook accounted for 76% of internet adspend outside China in 2016.
Big countries are adding most ad dollarsIn dollar terms, most of the growth in global adspend is coming from a few big markets. The report forecasts that just two countries – the US and China – will contribute 47% of new ad dollars between 2017 and 2020. The five biggest markets – the US, China, Japan, the UK and Germany – will contribute 57%.
Big cities are driving global adspend growthBig cities are driving global adspend by concentrating growth in productivity, innovation and trade. Top 10 cities alone will contribute 12% of all global adspend growth this year, and that the top 725 will contribute 60%.
Between 2016 and 2019, adspend in the 10 biggest-contributing cities will grow by a total of US$7.5bn, representing 11% of growth over these years. These 10 cities will be, in descending order: New York (where adspend will grow by US$1.4bn), Tokyo, Jakarta, Los Angeles, Shanghai, Houston, Dallas, Beijing, London and Chicago (which will grow by US$0.6bn).
Advertisers feel the pressure from digital transformation and polarisation of growthAdvertisers are feeling pressure from the rapid transformation of their businesses, exemplified by the rapid shift of marketing communications to online media in response to changing consumer behaviour, and the polarisation of growth to big platforms, big countries and big cities. At the end of November, Zenith also conducted the third in its series of exclusive surveys about brand growth among key of its clients. On a scale from 0 to 100 – where 0 means everyone expects decline in 2018, 100 means everyone expects growth, and 50 means the average expectation is for no growth – the average response was 57, down from 67 this time last year. Food and drink brands have been the least affected, with a score of 66 this year, down just a point from 67 last year. Packaged goods, retail and telecom brands have all fallen to 50, expecting no growth, down from positive scores last year.
“We are seeing a battle played out in business, marketing and media between big players and small players,” said Vittorio Bonori, Zenith’s Global Brand President. “Growth is coming from big countries and big cities, and being captured by big platforms. Brands should focus on upstream strategy, data-informed UX planning and downstream automation.”
Year 2017 will close at Rs.53, 918 crore, registering a slightly slower pace of growth is on account of demonetisation introduced in November 2016. Total adex for India will climb up to Rs. 58,422 crore, growing at 8.4% in 2018, led by television.
Tanmay Mohanty, Group CEO, Zenith India, says, “Growing Internet penetration accelerated by operators such as Jio will significantly enhance digital adspends in India and give access to previously untapped markets. India has seen some fluidity in overall ad-expenditure but remains one of the fastest growing advertising markets globally. With the dust settling down on demonetisation and GST, we expect a measured recovery on ad spends. Consumer confidence is definitely on the rise. In 2018, Mobile Handsets, FMCG, Automobiles, BFSI, Travel & Tourism and Political Ads will drive up the pace on adspends.”
Growth rate for television is pegged at 9% while newspapers will grow at 5%. Radio will grow at 10%, while cinema and out of home will grow at 5% respectively.
“Internet advertising is the biggest advertising medium in the world and the biggest driver of growth,” said Jonathan Barnard, Head of Forecasting and Director of Global Intelligence at Zenith. “Our unique research shows that brands are starting to use it effectively after struggling to adapt over the last few years.”
Contribution to global growth in adspend by medium 2017-2020 (US$ million)
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