Study

Global Ad­spend to Ac­cel­er­ate (in 2016) De­spite Eco­nomic Head­winds

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The global ad mar­ket is on course for 4.6% growth this year, up from 3.9% growth last year, ac­cord­ing to Zenithop­ti­me­dia’s new Ad­ver­tis­ing Ex­pen­di­ture Fore­casts, re­cently pub­lished. Global ad­ver­tis­ing ex­pen­di­ture will to­tal $579bn in 2016, and will ex­ceed $600bn in 2017, reach­ing $603bn by the end of the year.

The global econ­omy faces clear chal­lenges – such as the on­go­ing slow­down in China and re­ces­sion in Brazil and Rus­sia; the hu­man­i­tar­ian dis­as­ter orig­i­nat­ing in Syria; and un­cer­tainty over the fu­ture of the Euro­pean Union, no­tably con­tin­u­ing fragility in Greece and the pos­si­ble de­par­ture of the UK. But ad­ver­tis­ers’ con­fi­dence has re­mained largely un­shaken and Zenithop­ti­me­dia’s fore­casts for global growth in 2016 have barely changed since it pub­lished its last fore­casts in De­cem­ber (when it pre­dicted a 4.7% growth this year). There are three main rea­sons why the global me­dia agency is op­ti­mistic about the prospects for global ad­spend growth: spe­cial events this year, rapid re­cov­ery from the mar­kets most af­fected by the eu­ro­zone crisis, and the emer­gence of rapidly grow­ing mar­kets that are now open­ing up to in­ter­na­tional ad­ver­tis­ing.

Qua­dren­nial to lift ad growth by $6.1bn

In the short term, 2016 is a qua­dren­nial year, when ad ex­pen­di­ture is boosted by the US pres­i­den­tial elec­tions, the Sum­mer Olympics and the UEFA foot­ball cham­pi­onship in Europe. These events are ex­pected to add a net $6.1bn to the global ad mar­ket in 2016 ($3.2bn from the elec­tions, $2.0bn from the Olympics and $0.9bn from foot­ball). The qua­dren­nial will there­fore add 1.1 per­cent­age points to this year’s growth rate for global ad­ver­tis­ing ex­pen­di­ture, which would oth­er­wise be 3.5%.

Crisis-hit Euro­pean mar­kets now en­joy­ing rapid re­cov­ery

In the medium term, most of the Euro­pean ad mar­kets that suf­fered the deep­est cuts from the fi­nan­cial crisis and its af­ter­math are now en­joy­ing sus­tained re­cov­ery and will ex­pand rapidly over the next few years. Ad­spend in Ire­land, Por­tu­gal and Spain fell by a to­tal 45% be­tween 2007 and 2013. How­ever, ad­spend in these mar­kets re­cov­ered by 8.9% in 2014, and 7.3% in 2015, and is ex­pected to grow at an av­er­age of 6.7% a year to 2018. Other Euro­pean mar­kets that fell sharply dur­ing the crisis but are now grow­ing at a rapid pace in­clude Croa­tia (forecast to grow by 6.1% a year to 2018), Den­mark (7.3%), Hun­gary (5.2%) and Ro­ma­nia (6.3%). Even Greece is ex­pected to en­joy an­nual growth of 3.9%. These mar­kets have room to grow rapidly for sev­eral years to come: af­ter all, they have a lot of ground to make up.

As for the MENA re­gion, the drop in oil prices in 2014 has had a se­vere ef­fect on the economies in MENA, and has prompted ad­ver­tis­ers to cut back their bud­gets in an­tic­i­pa­tion of lower con­sumer de­mand. Po­lit­i­cal tur­moil and con­flict have fur­ther shaken ad­ver­tis­ers’ con­fi­dence in the re­gion. An 11.1% drop in ad­spend is ex­pected in MENA this year, fol­lowed by fur­ther de­clines of 5.0% in 2017 and 1.1% in 2018, av­er­ag­ing out at a 5.8% an­nual de­cline to 2018.

Zenithop­ti­me­dia iden­ti­fies thirty ris­ing me­dia mar­kets with longterm po­ten­tial for rapid growth

In the longer term, many smaller ad­ver­tis­ing mar­kets are now open­ing up to in­ter­na­tional ad­ver­tis­ing and have the po­ten­tial to grow at dou­bledigit rates for many years to come. Zenithop­ti­me­dia also pub­lished a new re­port, called the Thirty Ris­ing Me­dia Mar­kets, which looks at a se­lec­tion of 30 up-and-com­ing mar­kets for the first time. The reg­u­lar Ad­ver­tis­ing Ex­pen­di­ture Fore­casts re­port sur­veys 81 key ad­ver­tis­ing mar­kets across the world. For the Thirty Ris­ing Me­dia Mar­kets, they de­cided to look a bit fur­ther and iden­tify ad­ver­tis­ing mar­kets that are de­vel­op­ing quickly and are start­ing to ri­val the scale of some of the es­tab­lished 81 mar­kets. It is es­ti­mated that ad­ver­tis­ing ex­pen­di­ture across these 30 mar­kets to­talled $7.7bn in 2015.

Rapid growth from coun­tries that are rel­a­tively new to the in­ter­na­tional ad­ver­tis­ing mar­ket, com­bined with a resur­gence of es­tab­lished mar­kets that were dam­aged by the fi­nan­cial crisis, will keep the global ad mar­ket on track for healthy growth for at least the next few years. -- Jonathan Barnard, Head of Fore­cast­ing at Zenithop­ti­me­dia.

These 30 mar­kets* vary widely in na­ture: in size of pop­u­la­tion, open­ness to in­ter­na­tional busi­ness, di­ver­sity of eco­nomic ac­tiv­i­ties, pro­duc­tiv­ity, and ge­o­graph­i­cally – 16 of these mar­kets are in Africa, seven in Asia, six in Latin Amer­ica and one in the Mid­dle East. What they share is that their economies are grow­ing rapidly in the long run and that their ad­ver­tis­ing mar­kets are grow­ing even faster. The ad­ver­tis­ing ex­pen­di­ture in these 30 mar­kets is ex­pected to grow at an av­er­age rate of 15% a year be­tween 2015 and 2018 – more than three times faster than global av­er­age – and to in­crease by $3.9bn (a sum equal to the cur­rent size of Swe­den’s ad mar­ket) to $11.6bn. Ad­ver­tis­ing ac­counted for 0.37% of GDP across these 30 mar­kets in 2015, well be­low the global av­er­age of 0.70%, high­light­ing their long-term growth po­ten­tial.

In­ter­net will now over­take tele­vi­sion next year

As usual, In­ter­net ad­ver­tis­ing is the main driver of global ad­spend growth. In­ter­net ad­ver­tis­ing as a whole is ex­pected to grow at more than three times the global av­er­age rate this year – by 15.7%, driven by so­cial me­dia (31.9%), on­line video (22.4%) and paid search (15.7%). In­ter­net ad­ver­tis­ing’s growth rate is slow­ing as it ma­tures (it was 21.1% in 2014), but is ex­pected to re­main in dou­ble dig­its for the rest of our forecast pe­riod. This sus­tained growth, com­bined with down­grades to tele­vi­sion in Brazil and China, has led us to forecast In­ter­net ad­ver­tis­ing to over­take tele­vi­sion ad­ver­tis­ing glob­ally in 2017, a year ear­lier than De­cem­ber’s forecast.

An 11.1% drop in ad­spend is ex­pected in MENA this year.

Mo­bile to con­trib­ute 92% of ad­spend growth

The great ma­jor­ity of new In­ter­net ad­ver­tis­ing is tar­geted at mo­bile de­vices, thanks to their wide­spread adop­tion and ever-tighter in­te­gra­tion into con­sumers’ daily lives. Mo­bile ad­ver­tis­ing ex­pen­di­ture’s forecast is in­creas­ing: $64bn be­tween 2015 and 2018, grow­ing by 128% and ac­count­ing for 92% of new ad­ver­tis­ing dol­lars added to the global mar­ket over these years.

The rank­ing of the world’s largest ad mar­kets is cur­rently very sta­ble. The only change ex­pected be­tween 2015 and 2018 is for In­done­sia to dis­place Canada as the tenth-largest ad mar­ket.

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