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 per cent of their budgets on online advertising this year, up from 37.6 per cent in 2017, according to the Zenith Advertising Expenditure Forecasts report for 2018.
This growth in spend is part of the wider process of digital transformation, as advertisers invest in technology, data and innovation to revolutionise their relationships with consumers.
In Australia, total ad spend is forecast to rise by 2.6 per cent to $16 billion this year. The rise can be attributed to the strong online classifieds sector and marginal growth in metro TV in the last quarter of 2017.
“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.”
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.
Biggest upgrade in global ad spend forecasts for seven years
Confidence in the global ad market is currently improving rapidly. In December Zenith forecast that global ad spend 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. Zenith now expects 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 the forecasts is unusual; the last time Zenith revised them upwards by so much was back in March 2011.
“In Australia, our ad spend growth is slower and fuelled by strong online classifieds and some marginal growth in metro TV during the pre-Christmas retail period. In addition, digital and out-of-home continue to enjoy growth ahead of the market, however the rate of growth of digital out-of-home is starting to slow,” Zenith Australia CEO, Nickie Scriven, said.
“Among advertisers, automotive and retail continue to drive growth, while government and food/produce/dairy have had the largest declines in volume.”
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. Zenith now expects ad spend 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 ad spend, 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 ad spend, which it did in 2014, 2015 and 2017. Zenith expects one per cent growth in television ad spend 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. Zenith now forecasts that ad spend will grow one per cent in Argentina this year, up from its previous forecast of two per cent decline, as consumer spending starts to rise again. Zenith’s global forecasts for 2019 and 2020 are also above the forecasts it made three months ago, though not by so much. Zenith forecasts 4.4 per cent growth in 2019 and 4.3 per cent growth in 2020, both forecasts being up by 0.2 percentage points.
“The global ad market grew by four per cent 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.”