For the first time this year, digital ad sales will represent more than half of global ad sales at $306 billion, according to Magna’s Advertising Forecasts winter update. Digital ad sales, however, might level off soon due to an overall decrease in ad spend over the last four years and a weakening economy.
Fueled by heavy spending in industries such as tech and entertainment, ad spend grew 5.2 percent year-over-year in 62 of the 70 countries Magna analyzed, including a five percent increase in the US, a nine percent increase in China, a seven percent increase in Russia, a 13 percent increase in India and a seven percent increase in the UK.
Similarly, Zenith’s December 2019 “Advertising Expenditure Forecast” predicts the US ad market will grow by $39.1 billion between 2019 and 2022 while China’s will grow by $10.3 billion. Over the next three years, the US and China combined will account for 56 percent of all growth in ad expenditure. India’s ad market, on the other hand, will grow $4.3 billion between 2019 and 2022.
The digital category grew 15 percent this year globally, but all digital ad formats are slowing down due to the maturity of digital media consumption and digital marketing in most markets. Up by 25 percent, social media is the fastest growing digital format, according to GroupM’s “This Year Next Year Worldwide Media Forecasts,” but the figure still represents a decrease from the 34 percent growth it saw in 2018. Online video will grow 16.6 percent a year on average between 2019 and 2022, as Zenith reported.
Traditional linear ad sales including linear television, print, radio and out-of-home (OOH) declined by 3.4 percent to $289 billion, accounting for less than half of total ad sales for the first time. While print ad sales declined by 10 percent and radio ad revenues remained stable, OOH was the only traditional media to show growth, a six percent increase. In the US, national television ad sales slipped by three percent to $42 billion this year and will decline further in 2020.
Today, digital-first brands account for a major share of global advertising. Yet despite Amazon, Facebook, Netflix and Alibaba each spending over $1 billion in advertising—accounting for $36 billion in spending in 2018—GroupM has downgraded its 2020 global ad growth forecast to 3.9 percent, and 3.1 percent for 2021.
The weakening economy will have an impact on ad spend growth as the worldwide real gross domestic product (GDP) is forecast to decrease to 2.5 percent in 2020. According to the GroupM study’s author, Brian Wieser, global president of business intelligence, if the forecast proves accurate, it would mark “the slowest pace of growth in any non-recession/non-recovery year over the past two decades.” Helping sustain marketing growth in 2019 has been growth in personal consumption expenditures (PCE), which might be more important to track than GDP given consumer spending represents more than half of all economic activity.
In positive news, Magna predicts that cyclical events such as the US political elections and Olympics, increased marketing activity of tech and entertainment and the reallocation of trade marketing budgets from brick-and-mortar to ecommerce platforms’ product search will help mitigate the global economic slowdown.
