Global advertising spend is expected to rise 4.4% to US$561bn this year, following estimated growth of 3.1% in 2015, according to marketing intelligence service Warc.
However, the rate of expansion is set to slow to +3.7% in 2017, it added.
Increasing investment in mobile formats is set to underpin the headline growth. Warc calculates that US$90bn 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 (US$40bn in 2017), social (US$28bn) and video (US$10bn) 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 organisations and ad industry bodies, and combined with broader GDP and consumer spend forecasts from the OECD and IMF.
[gallery link="file" ids="130085,130086,130087"]
Mobile adspend doubles as desktop stagnates
The report finds that global advertising spend on desktop internet has stagnated at around US$112bn, and is likely to decline from this year onwards. Instead it will be mobile formats which drive growth in online advertising investment in the coming years. The forecast US$90bn spend on mobile advertisements worldwide in 2017 is a near doubling from the estimated US$48bn spent in 2015.
Social: Warc believes US advertising spend on mobile social formats surpassed US$10bn in 2015, around a fifth of all online adspend that year. Worldwide, mobile-specific social adspend will reach US$28bn 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 RMB8.9bn (US$1.4bn) 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 US$10bn next year.
Search: Adspend on mobile search is rocketing, and is likely to reach US$40bn 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
Ad 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 US$175bn 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 US$3bn will be spent to secure TV ad space in the US this year, pushing the annual total for the medium to a record US$66.5bn.
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 US$167bn will be spent to 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 US$192bn 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 US$150bn 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 heathy growth, benefitting from strong investment in mobile formats and a resilient TV sector.
In 2017, European adspend will reach US$154bn, following annual growth of 2.9%.
Central and South America will see adspend rise 5.5% to US$39bn 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.