29 March, 2017

Global Online Ad Spend To Surpass US$200bn (& TV) In 2017: Zenith

By Rochelle Burbury

This year will be the first time that more advertising money will be spent on internet than TV globally, according to a new report by Zenith.

The group’s Global Advertising Expenditure report found that global internet advertising expenditure will grow 13 per cent to US$205 billion in 2017, with the worldwide web to attract 36.9 per cent of all advertising expenditure – up from 34. per cent in 2016.

In comparison, traditional TV advertising spend will total US$192 billion.

However, the sheer scale of internet advertising means its growth rate is slowing. Internet ad spend grew 17 per cent in 2016, down from 20 per cent in 2015, and growth is expected to slow to 13 per cent in 2017, 12 per cent in 2018 and 10 per cent by 2019, according to the report.

The report found that the Aussie advertising market finished 2016 with growth of 3.8 per cent, slightly higher than Zenith originally forecast.

Digital expenditure continues to be the main driver of total market inflation in Australia with growth of 15 per cent in 2016. Mobile and online video spend in particular fuelled this growth in 2016.

TV revenue was down 3.9 per cent, continuing to be under pressure from audience declines and the growth of digital.

Print also continued to decline, although the pace is now starting to slow. Press declined by 13.4 per cent in 2016 and is now only 11 per cent of total ad spend versus being more than 25 per cent just five years ago, while magazines were down 17.7 per cent.

Out-of-home grew by 7.9 per cent in Australia, benefiting from the increase in supply and quality of inventory as static panels are converted to digital formats. Radio also grew, up 5.8 per cent, with increased spend from big spending categories like retail and automotive, Zenith found.

Zenith Australia CEO Nickie Scriven said: “Looking forward into 2017, we are forecasting growth to be at 3.4 per cent.

“Digital will continue to be the main driver of this growth. Radio and out-of-home growth will moderate slightly and we continue to forecast declines in TV and print.

“Our 2017 revenue forecast is behind 2016’s growth, but still above overall economic growth in Australia, which will be around 2 per cent in 2017.

“Overall consumer confidence is flat, with consumers having a cautious outlook around economic indicators like cost of housing, rising commodity costs and unemployment growth. Despite this, major advertising categories like retail, automotive, finance and travel continue to have modest growth in their spend.”

Social media to overtake newspaper advertising in 2019

Zenith forecasts advertising expenditure on social media to reach US$55 billion in 2019, overtaking advertising expenditure on printed newspapers, which will total US$50 billion.

Social media advertising is the fastest-growing component of internet advertising – growing 51 per cent in 2016, and Zenith forecasts it to grow at an average rate of 20 per cent a year to 2019.

Meanwhile, the report shows newspaper advertising is shrinking by 5 per cent a year as circulations continue to fall. Newspaper ad spend has shrunk every year since peaking at US$113 billion in 2007, and by 2019 will be back to levels last seen in 1985 – and that’s without adjusting for inflation.

Zenith noted that these newspaper figures only include advertising in printed editions – newspapers’ online revenues are included in the internet advertising total.

Long streak of steady global ad spend growth to continue

The global ad market has grown at a steady pace of 4 to 5 per cent a year since the beginning of the decade, and Zenith expects it to continue to do so through to 2019.

Its forecast for 2017 is for 4.4 per cent growth (unchanged since it last published its forecasts in December), down slightly from 4.6 per cent growth in 2016, and predicts 4.4 per cent growth in 2018 and 4.2 per cent growth in 2019.

Advertising growth is concentrated in big cities

Zenith estimates that just 10 cities will contribute 11 per cent of all the growth in global ad spend between 2016 and 2019: in descending order of contribution – New York, London, Los Angeles, Jakarta, Tokyo, Shanghai, Manila, Beijing, Dallas and Houston.

Last year, US$61 billion was spent targeting the population of these 10 cities, and Zenith forecasts this total to rise to US$69 billion by 2019.

The top 50 will contribute 27 per cent of total global growth, and the top 250 will contribute 50 per cent.

New York is the world’s most important city for advertising, where US$15 billion will be spent this year, followed by Tokyo (US$13 billion), Los Angeles (US$9 billion), London (US$8 billion) and Chicago (US$6 billion).

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