Advertisers will spend approximately 40.2% of their budgets on online advertising in 2018, compared to 37.6% in last year. By 2020, online advertising is expected to account for 44.6% of global ad spend.
This comes amidst growing industry speculation about digital advertising budget cuts, and is part of the wider process of digital transformation, according to Zenith’s latest Advertising Expenditure Forecasts report. It combined six independent studies on brand growth into a single index, and analysed how the new ranking correlated with financial performance, media activity, digital activity, and the performance of owned and earned content.
According to the report, countries in the Fast-track Asia category, including Malaysia, Indonesia, the Philippines and China, are expected to see an average ad spend growth of 7.4% annually until 2020. In 2017, ad spend grew by 6.8% for the region, despite the fact that it saw an ad spend of about 10.1% in 2016. Fast-track Asia is characterised by economies that are growing extremely rapidly as they adopt Western technology and practices and innovate new ones, while benefiting from the rapid inflow of funds from investors hoping to tap into this growth.
On the other hand, the countries in the Advanced Asia category - Singapore, Hong Kong, Australia, New Zealand and South Korea - are estimated to witness a 3.8% average annual growth to 2020, ahead of the 3.1% average growth rate since 2012. Ad spend in the region grew 5.3% in 2015, but slipped back to approximately 1.8% this year.
Over the next three years, the US will be the leading contributor of new ad dollars to the global market, followed by China, which combines large scale and rapid growth. Between 2017 and 2020 the report forecasts global advertising expenditure to increase by US$77 billion in total. The US will contribute 26% of this extra ad expenditure and China will contribute 22%, followed by Indonesia, India, the UK and Japan, which will contribute 4% each.
Seven of the 10 largest contributors will be the Rising Markets - China, Indonesia, India, Philippines, Brazil, Russia and South Korea. Between them, they will contribute 40% of new ad spend over the next three years. Overall, the report predicts Rising Markets to contribute 57% of additional ad expenditure between 2017 and 2020, and to increase their share of the global market from 37% to 39%.
The report predicts an average growth of 10% a year for internet ad spend between 2017 and 2020, stating that internet advertising overtook advertising on traditional television in 2017 to become the world’s biggest advertising medium.
As for internet ad spend by device, including display, classified, search and in-app ads, the report forecast an average annual growth rate of 19% a year between 2017 and 2020. This is driven by the rapid spread of devices and improvements in user experiences. On the other hand, desktop internet advertising is predicted to shrink at an average rate of 1% a year as advertisers follow consumers to mobile.
Mobile advertising to grow
Mobile advertising is predicted to grow to US$180 billion by 2020, nearly doubling desktop advertising's US$94 billion total. According to the report, mobile will also account for 65.6% of internet expenditure and 29.3% of all expenditure in 2020, more than all the traditional media except television put together.
It is also expected to contribute US$73 billion in extra ad spend between 2017 and 2020, which will be counterbalanced by a US$2 billion decline in desktop advertising, as advertisers switch budgets to mobile.
This is also combined with a US$12 billion decline from print. TV and outdoor advertising will be the second and third-largest contributors, growing respectively by US$7 billion and US$3 billion, while cinema and radio grow by about US$2 billion and US$1 billion respectively.
Zenith stated that confidence in the global ad market is "improving rapidly", predicting global ad spend to rise by 4.6% in 2018 due to improved economic growth in China and Argentina. Zenith also forecasted a 4.4% and 4.3% growth in global ad spend for 2019 and 2020 respectively.
Jonathan Barnard, Zenith’s head of forecasting and director of global Intelligence said the agency expects the global ad market, which grew by 4.0% last year, is expected to grow "substantially faster" in 2018. This is boosted by the Winter Olympics, football World Cup and US mid-term elections.
Meanwhile, internet advertising overtook advertising on traditional television to become the world’s biggest advertising medium, accounting for 37.6% of total ad expenditure. Zenith's report predicts an average growth of 10% a year for internet ad spend between 2017 and 2020, with the segment accounting for 44.6% of global ad spend.
Display, an internet sub-category including banners, online video and social media, is predicted to grow 13% annually until 2020. According to the report, online video and social media are the current driving forces of internet ad spend growth, forecasting a 17% year on average growth between 2017 and 2020.
Online video is benefiting from the increasing availability of high-quality content, and improvements to the mobile viewing experience, such as better displays and faster connections. As such, online video ads are now an important component of social media platforms’ revenues. Meanwhile, paid search (8%) and classified (7%) are both lagging substantially behind display annually.
Newspaper and magazine ad spend to shrink
Zenith's report also predicts newspapers and magazines to shrink at an average rate of 5% and 6% a year respectively, ending with respective 7% and 4% market shares in 2020. While TV used to be the dominant advertising medium between 1996 and 2016, it is predicted to have a 31.2% global ad market share in 2020, its lowest since 1981.
Paid search's rapid growth is cited as one of the reasons for TV's loss of share. The report classified paid search as a direct response channel, while TV is the pre-eminent brand awareness channel. If companies were to disregard internet classified and search, TV will still remain the principal display medium "for many years to come", Zenith's report stated. It estimated TV to account for 39.8% of display ad spend in 2020.
Meanwhile, audio visual advertising, including TV and online video, which was predicted to account for 48.4% of display advertising last year, is expected to rise in share to 48.8% in 2020.
The six independent studies analysed by Zenith were from Millward Brown Brandz, Seigel & Gale Brand Simplicity Index, Interbrand Top 100, NetBase Brand Love study, Brand Finance Top 500 and the European Brand Institute’s Top 100.