The global advertising market will grow up to 6% a year over the next three years, driven by mobile, social media and the transition to programmatic buying of digital display, according to a new report.
The study, from ZenithOptimedia’s new Advertising Expenditure Forecasts, indicates that global adspend will grow 4.9% to reach US$545 billion in 2015.
The global economy is expected to improve (the IMF predicts 3.8% global GDP growth in 2015, up from 3.3% in 2014), but advertising faces a tough year-on-year comparison after the Winter Olympics, World Cup and US mid-term elections in 2014. Adspend growth will therefore be slightly below 2014’s 5.1% the report said.
The report expects 2016 to be a ‘quadrennial year’ with 5.6% ad growth propelled by the Summer Olympics, U.S. Presidential elections and the UEFA European Football Championship.
Then, growth slips back to 5.2% in 2017 because of an absence of these types of momentous events.
The U.S. will lead the global market in new ad spend between 2014 and 2017, accounting for 25% of the $86 billion in additional expenditures. China comes in second at 19%, followed by Argentina at 7% and the UK at 5%.
There are three key factors driving future ad spend growth: mobile, social media, and the transition to programmatic buying of digital display, per the forecast.
“Mobile technology is creating new opportunities for brands to build relationships with consumers, while programmatic buying is making brand communication cheaper and more effective,” said Steve King, ZenithOptimedia’s CEO, Worldwide. “Social media provides a strong example of how to advertise effectively on mobile platforms, and we expect mobile marketing to develop further as other media learn from this example.”
The study found that one in five people in the world own a smartphone, with mobile advertising expected to grow by an average of 38% a year between 2014 and 2017, driven by the rapid spread of devices, innovations in ad technology and improvements in user experiences.
In fact, mobile will account for 51% of all new advertising dollars between 2014 and 2017 the report forecasted.
Despite that growth, mobile advertising spend it likely to only account for 6.2 per cent of all spend in the US with digital display singled out as one key driver.
“Compared to desktop display, mobile banners take up more screen space, are considered more intrusive, and are more likely to annoy consumers than engage them. Because mobiles don’t accept cookies, retargeting and tracking from the ad to the purchase is usually impossible,” says the report.
Digital display has proved very successful on mobile social media. Facebook and Twitter are projected to receive 33% of all mobile ad spend in 2014, significantly above their 10% share of all digital ad spend.
“Their ads are designed to blend seamlessly into the content feed — they look native rather than intrusive. They can track all their users’ media consumption within their apps, and can tie that into their desktop activity through their login details. Social media provides a great example of how to adapt to mobile,” the report stated.
Move to programmatic
The shift to programmatic has given a sharp boost to traditional display.
“Agencies are swiftly adopting programmatic buying, which allows them to target display ads accurately and efficiently. The technology has recently evolved to deliver better premium, brand-building experiences. This has provided a sharp boost to ‘traditional’ digital display, as well as video and social.”
Growth in traditional display increased from 14% in 2012 to 18% in 2013, and 26% in 2014, its fastest rate of growth since 2007.
TV market share to fall as online video rises
Although TV’s market share of global ad spend has steadily grown from 29.9% in 1980 to 39.6% in 2014, the report asserts that TV has peaked and will fall to 37.4% in 2017.
By contrast online video’s share of global ad spend will increase from 1.9% in 2014 to 2.8% in 2017.
Global economy- Latin America leads growth
Meanwhile, the global economy is expected to improve, with the IMF predicting 3.8% global GDP growth in 2015, up from 3.3% in 2014.
In terms of regions, Latin America is expected to grow fastest with 10% increase in adspend a year through 2017, largely benefiting from the 2016 Olympics in Brazil.
Emerging Asian markets, such as India, China, Pakistan, and Indonesia, are projected strong 10%-11% annual growth.
The Middle East and North Africa, as well as Asian countries, Australia, New Zealand, Singapore, and South Korea will experience 4%-6% annual growth.
The report singled out Japan and the Eurozone as sreads of slow growth. Japan will continue to struggle at 2% to 3% annual growth, and ZO doesn’t expect it to improve over its forecast period.
Europe, on the other hand, may end 2014 with its first year of growth since 2010, and with further improvement likely over the next few years, the report found. Greece, Portugal, Spain and Ireland all began to make strong recoveries in 2014, and over the next few years ZO expects them to substantially outperform the EU 2% average, growing at 5.4% a year through to 2017.
France, meanwhile, will shrink at an average rate of 0.3% a year between 2014 and 2017, while Germany will grow by just 1.3% and Italy by 1.5, according to the study.
After many years of double-digit ad-spend growth, Russia’s ad market is forecast to grow just 1.8% this year and 1.1% in 2015, followed by 4.6% growth in 2016 and 9.2% in 2017. Ad spend in Ukraine will fall 49% in 2014 and 10% in 2015, followed by 6% recovery in 2016 and 2017 from a greatly reduced base.