Zenith.- No evidence of digital adspend cut amid the biggest upgrade in global ad investment forecasts in seven years

Confidence in the global ad market is currently improving rapidly. In December Zenith’s forecast was that global adspend would rise by 4.1% in 2018, towards the bottom of the 4%-5% annual growth range that the market has maintained since 2011. The media agency now expects the market to rise by 4.6% this year, thanks in particular to improved economic growth in China and Argentina.

© Zenith

A 0.5 percentage point revision to Zenith’s forecast is unusual; the last time the agency revised them upwards by so much was back in March 2011.

Vittorio Bonori, Zenith’s Global Brand President. Source of the image, the Linked-in profile of Vittorio Bonori.

Amid growing industry speculation about cuts to digital advertising budgets, Zenith has found no evidence that advertisers as a whole are shifting budgets away from online advertising. In fact, its share of global advertising expenditure continues to rise rapidly.
Zenith forecasts that advertisers will spend 40.2% of their budgets on online advertising this year, up from 37.6% in 2017.

Of course, Zenith underscores, the rise in online advertising tells only part of the story of digital transformation.

Rapid as the rise of online adspend has been, the rise of advertising tech has been much faster. Zenith tracked the revenues of 14 listed ad tech companies between 2010 and 2016, and found that their revenues grew five times faster than online revenues over this time.

Companies have also invested heavily in innovation. Since 2010, companies in the OECD have increased their investment in research and development three times faster than they have increased their adspend.

“We are observing sustained ROI from digital transformation,” said Vittorio Bonori, Zenith’s Global Brand President. “And we are now at the forefront of a transformation as brands shift budgets along the consumer journey, benefit from powerful algorithms and advanced machine learning techniques, and invest in new e-commerce solutions. This transformation is at the heart of driving brand growth.”

Online advertising to reach over 40% total adspend

Globally, advertisers continue to increase the share of their budgets allocated to paid digital channels. According to the March 2018 edition of Zenith’s Advertising Expenditure Forecasts, published today, online advertising grew by 13.7% in 2017 to $204Bn. It accounted for 37.6% of global advertising expenditure in 2017, up from 34.3% in 2016.

© Zenith

This year Zenith expects online advertising’s market share to exceed 40% globally for the first time, reaching 40.2%.

In 2017 online advertising already accounted for more than 55% of adspend in three markets (China, Sweden and the UK), so there is plenty of potential for further growth. By 2020 the media agency fortells online advertising to account for 44.6% of global adspend.

Online advertising, effective, despite latest concerns

The concerns of global advertisers about the effectiveness of some digital media investments and the safety of the digital environment have been widely reported. However, a number of Zenith’s global research projects link brand experience impact and brand growth to progressive use of digital throughout the consumer journey.

© Zenith

New research from Zenith demonstrates the value of investing in transformational digital marketing.
The agency created a standard index of brand growth, comparing results from prominent studies and matching brand performance with a series of communications and media benchmarks.

© Zenith

Initial findings indicate that the fastest growing brands within categories such as communications, financial services and automotive tend to perform strongly on measures such as share of category search and website traffic; along with effective content marketing and strong performance in earned digital media. For automotive brands, for example, there’s an 89% correlation between their ability to rise up the index and the traffic to their websites.

Highest upgrade in global adspend forecasts for seven years

China’s economy has surprised analysts with particularly strong growth in early 2018, with industrial production and infrastructure spending beating expectations. Investment in manufacturing has picked up, and business confidence has increased. We now expect adspend to grow 8% this year, up from our 6% forecast in December.

© Zenith

China is the world’s second biggest ad market, accounting for 15% of global adspend, so an upgrade here has a big effect on the global total. A notable development here is that television has fought back against strong competition from online video and is no longer losing adspend, which it did in 2014, 2015 and 2017.
Zenith expects 1% growth in television adspend in China this year, alongside 13% increase in online advertising.

Jonathan Barnard (Jefe de Pronósticos en Zenith). Imagen, cortesía de Jonathan Barnard.
Jonathan Barnard (Zenith’s Head of Forecasting). Image by courtesy of Jonathan Barnard.

Argentina has recovered from its 2016 recession more rapidly than expected. GDP grew 2.8% in 2017, beating the IMF’s forecast of 2.5% growth, fuelled by construction, agriculture and foreign investment.

Zenith now forecasts that adspend will grow 1% in Argentina this year, up from their previous forecast of 2% decline, as consumer spending starts to rise again.

The global forecasts for 2019 and 2020 are also above those they made three months ago, though not by so much. The foretells now are 4.4% growth in 2019 and 4.3% rise in 2020, both forecasts being up by 0.2 percentage points.

“The global ad market grew by 4.0% last year,” said Jonathan Barnard, Zenith’s Head of Forecasting and Director of Global Intelligence. “After a jump in confidence, we now expect it to grow substantially faster this year, boosted by the Winter Olympics, football World Cup and US mid-term elections.”

Image over the headline.- © Zenith

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