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Zenith: Online advertising will exceed 40 per cent of global adspend this year

We publish new advertising forecasts every three months at Zenith, each time canvassing the collective opinion of well over a hundred experts across the world. We revise often, but generally by small amounts. A big change in our forecasts is a sign that something dramatic is happening to the global ad market. That can be bad: a rapid drop in our forecasts in mid-2008 was the first sign of the huge ad recession that was to come in 2009. This month, though, we have better news to report.

 

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Confidence in the global ad market is currently improving rapidly. In December we forecast that global adspend would rise by 4.1 per cent in 2018, towards the bottom of the 4-5 per cent annual growth range that the market has maintained since 2011. We now expect the market to rise by 4.6 per cent this year, thanks in particular to improved economic growth in China and Argentina. A 0.5 percentage point revision to our forecasts is unusual; the last time we revised them upwards by so much was back in March 2011.

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 eight per cent this year, up from our six per cent forecast in December. China is the world’s second biggest ad market, accounting for 15 per cent 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. We expect one per cent growth in television adspend in China this year, alongside 13 per cent growth in online advertising.

Argentina has recovered from its 2016 recession more rapidly than expected. GDP grew 2.8 per cent in 2017, beating the IMF’s forecast of 2.5 per cent growth, fuelled by construction, agriculture and foreign investment. We now forecast that adspend will grow one per cent in Argentina this year, up from our previous forecast of two per cent decline, as consumer spending starts to rise again. 

 

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Our global forecasts for 2019 and 2020 are also above the forecasts we made three months ago, though not by so much. We forecast 4.4 per cent growth in 2019 and 4.3 per cent growth in 2020, both forecasts being up by 0.2 percentage points. 

Looking at individual media, the dominant story over the past few years has been the rise and rise of digital. Industry voices are beginning to question the inevitability of this trend, and some are calling for it to be reversed. We see no evidence that advertisers as a whole are going to start are shifting budgets away from online advertising any time soon – in fact, its share of global advertising expenditure continues to rise rapidly. 

Online advertising grew by 13.7 per cent in 2017 to US$204bn. It accounted for 37.6 per cent of global advertising expenditure in 2017, up from 34.3 per cent in 2016. This year we expect online advertising’s market share to exceed 40 per cent globally for the first time, reaching 40.2 per cent. In 2017 online advertising already accounted for more than 55 per cent of adspend in three markets (China, Sweden and the UK), so there is plenty of potential for further growth. By 2020 we expect online advertising to account for 44.6 per cent of global adspend.

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