- At current development rates, by mid-2020s India will overtake China as the second-biggest growth driver in the world.
- Demand for mass audiences continues to rise, but supply is falling as consumers turn to non-commercial media
- Media inflation has exceeded adspend growth throughout the decade
- US-China trade war will offset the gains from sport and elections in 2020
Advertisers will increase their global ad expenditure by 4.3% in 2020, but the commercial audiences supplied by media owners will shrink by 1.6%, fuelling a 6.1% increase in media prices, according to Zenith’s Advertising Expenditure Forecasts, published today.
Demand for advertising has grown consistently throughout this decade. To sustain market share, large brands need to maintain brand awareness among buyers and potential buyers, which requires regular, brand-building campaigns with mass reach. The same goes for smaller brands looking to grow their business. Meanwhile small businesses, which may not have advertised at all previously, have embraced targeted advertising on digital platforms and injected new demand into the market. Advertising expenditure has grown by 5.1% on average since 2010.
However, traditional mass audiences are shrinking: first print, and now television in key markets. Many lost audiences are replacing television viewing with non-commercial video like Netflix, Amazon Prime Video, HBO, and eventually Disney+, reducing available audiences and creating fragmentation. The use of adblockers means that some audiences have low exposure to digital advertising. This rising demand and falling supply is increasing prices rapidly. The supply of commercial audiences has shrunk by 1.3% a year on average since 2010, according to exclusive Zenith research, while media inflation has averaged 6.5% a year.
“The days when we could find audiences all in one place are long gone. Now, however, technology empowers us to find them wherever they are, online or offline, and win back value for our clients through efficiency and effectiveness – by ensuring that we target and reach consumers with the right message at the right point in the consumer journey,” said Matt James, Global Brand President at Zenith.
US-China trade war to counter the quadrennial effect in 2020
Next year is a ‘quadrennial’ year, benefitting from the Summer Olympics, UEFA Euro 2020 and US Presidential elections, which occur every four years. These ad expenditure stimulants are expected to add US$7.5bn into the global ad market. In normal circumstances, adspend growth in 2020 would be comfortably above this year’s growth rate. However, forecasted 4.3% growth next year is barely above 2019’s estimated 4.2% growth. The US-China trade dispute is disrupting economies across the world, interrupting supply chains and rerouting trade and investment. This is reducing growth and raising uncertainty, making advertisers more cautious about budgeting. Zenith estimates this economic headwind will cost the global ad market 1.1 percentage points of growth in 2020. Without it, the market would be up by 5.4%.
India to take over as second-biggest contributor to ad growth in mid-2020s
Despite the trade dispute, the US and China are still leading global adspend growth. The US ad market is forecast to grow by US$39.1bn between 2019 and 2022, while China grows by US$10.3bn. Together they will account for 56% of all growth in ad expenditure over the next three years. China’s growth rate is slowing, however, as its ad market matures. After years of being a production-led, high-growth economy, China is transitioning into a consumer-led developed economy, and its ad market is becoming more similar to other developed economies. Chinese adspend is forecast to grow 4.1% in 2020, compared to 4.8% in the US.
The third-biggest contributor is India, which will grow by US$4.3bn between 2019 and 2022. Indian adspend is steadily increasing by double-digit rates, with growth forecast at 12.4% in 2020, 12.9% in 2021 and 12.6% in 2022. The Indian ad market has great potential for long-term growth, contributing just 0.3% of GDP this year compared to 0.6% in China and 0.7% for the world as a whole. At current development rates, by the mid-2020s India will overtake China as the main source of growth in Asia Pacific, and the second-biggest in the world.
Online video and social media continue to lead growth
Online video and social media will remain the fastest-growing channels between 2019 and 2022, growing respectively by 16.6% and 13.8% a year on average, thanks mainly to continued increases in consumption on smartphones. Cinema will be in third place with 11.5% annual growth, driven by surging demand in China, but will still only account for 0.9% of global adspend in 2022.
Television will record zero growth over the next three years, as price inflation counterbalances the decline in global audiences. Prices are rising for printed newspapers and magazines as well, but not quickly enough to compensate for the persistent and rapid decline in readership. Newspaper adspend will shrink by 4.5% a year to 2022, and magazines will shrink by 8.1% a year.
“As geopolitical tensions wipe out most of the expected gains from sport and elections, 2020 will be a disappointing quadrennial year for the ad market,” said Jonathan Barnard, Zenith’s Head of Forecasting. “If the trade war is settled, we are more confident for 2021, forecasting 4.5% growth in global adspend despite the absence of the quadrennial events.”
