The US, the Philippines and Western Europe drive faster adspend growth
This upgrade is mainly the result of stronger‐than‐expected growth in the US, where a strong labour market has encouraged consumers to increase their expenditure, and advertisers have fought harder for their share of the expanding market. Zenith expects US network TV to return to growth this year (at one per cent) after shrinking five per cent last year, thanks to new spending by pharmaceutical and consumer packaged goods companies and a strong upfront. It also expects social media to accelerate from 32 per cent growth last year to 35 per cent growth this year, as advertisers take advantage of new formats, such as in‐feed video, and the transition to mobile internet consumption continues. Overall, Zenith forecasts US adspend to grow 4.4 per cent this year, compared to our previous forecast of 3.8 per cent.
Zenith has also made slight upgrades to its adspend forecasts for Asia Pacific and Western Europe. It now expects Asia Pacific to grow 6.3 per cent this year, up from our previous forecast of 6.2 per cent, thanks to heavy political spending in the Philippines in the run‐up to the May 2016 elections. It has also increased our forecast for Western Europe, where improved conditions in Belgium, Finland, Germany, Italy, Norway, Portugal and Sweden have compensated for slowdown in the UK. We now forecast 3.6 per cent growth in Western Europe this year, up from 3.5 per cent in June.
Mild weakening of UK ad market after Brexit vote
Although the vote for ‘Brexit’ in the UK’s EU referendum came as a shock to many in the market, so far advertisers have reacted calmly, with no widespread budget reductions. We forecast 5.4 per cent growth in adspend this year, fractionally less than our 5.6 per cent forecast just before the vote. As Zenith has argued before, most of the impact that Brexit will have on the UK ad market will come in the long term. The UK’s new terms of trade with the EU and other countries – whatever they turn out to be – are likely to restrict flows of trade and investment in comparison with the pre‐Brexit status quo, leading to slower economic growth and slower growth in advertising expenditure. In the short term, uncertainty about the consequences of the vote will make companies less likely to invest in new products, and consumers less likely to take on big spending commitments. This could lead to anything from disappointingly slow growth to outright recession. Zenith’s current forecasts assume that economic growth will slow but remain positive, in which case UK adspend will grow 3.4 per cent next year, down from our pre‐vote forecast of 4.0 per cent growth.
Mobile advertising taking over from desktop even faster than expected
In June Zenith forecasted that mobile advertising would overtake desktop in 2017. It still expects that to happen, but has upgraded its forecasts for mobile growth for this year (from 46 per cent to 48 per cent) and next year (from 29 per cent to 33 per cent), and now expects mobile adspend to exceed desktop by US$8bn in 2017, up from the US$2bn it predicted in June. By 2018 it expects mobile to account for 60 per cent of all internet advertising, up from our previous forecast of 58 per cent.
Desktop to shrink by more than newspapers or magazines to 2018
Desktop advertising peaked in 2014 at US$99.0bn and shrank 0.1 per cent in 2015 to US$98.9bn as advertisers switched their budgets to mobile. Zenith expects the decline of desktop advertising to gain momentum over the next few years, with desktop adspend falling by 0.8 per cent in 2016, 2.9 per cenrt in 2017 and 7.4 per cent in 2018. Between 2015 and 2018 desktop adspend will shrink by US$10.7bn, more than the other two declining media – newspapers (which will shrink by US$9.6bn) and magazines (US$4.4bn). Meanwhile mobile adspend will grow by US$81.3bn over the same period, seven times more than the combined growth of television (US$7.3bn), outdoor (US$3.0bn), radio (US$0.9bn) and cinema (US$0.7bn).
“The global ad market has strengthened over the past few months, thanks mainly to the resilient US consumer,” said Jonathan Barnard, head of forecasting at Zenith. “So far any impact from the vote for Brexit has been limited, and confined to the UK. We expect the global ad market to strengthen further in 2017 and 2018.”
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