The global ad market will continue its remarkable recovery from the 2020 downturn with 9.1 per cent growth in 2022, after 15.6 per cent growth in 2021, according to Zenith’s Advertising Expenditure Forecasts report, published today. Global adspend will expand by 5.7 per cent in 2023 and 7.4 per cent in 2024 as brands continue using advertising to spur further growth in ecommerce.

Zenith estimates that global adspend will reach US$705bn in 2021, up from US$634bn in 2019, and will rise to US$873bn by 2024.

These forecasts were prepared before the emergence of the omicron variant, and should be read with this in mind. It is too early to make any definite statement on how the variant will affect advertising, but clearly it has increased the risks. The travel, hospitality and bricks-and-mortar retail sectors in particular face risks on the downside, but there is potentially an upside to ecommerce and related digital advertising.

In Australia, Zenith’s national head of investment, Elizabeth Baker (main photo) said total adspend is forecast to grow five per cent in 2022, trailing 18 per cent growth in 2021.

“Digital and TV ad spend recovery has been rapid, and recent lockdown restrictions in Australia has not appeared to dampen growth. Consumer confidence is relatively stable, despite the slight drop over the last weekend of November, following omicron news and international border closure announcements. However, retail outlook appears to be healthy with major household item purchase intent remaining strong.”

“The Tokyo Olympics provided a strong cash injection in Q3 advertising investment. Whilst we would typically see a contraction of revenues in the year following the Summer Olympics,  the combination of premium sporting events, The Ashes, Winter Olympics and Commonwealth Games, with a Federal Election in Q2 2022 as well as some state elections  should facilitate ad spend stability, especially across TV and Digital,” Baker said.

COVID-19 setbacks have extended the period of heightened digital transformation

The pandemic has thoroughly disrupted shopping habits. Many consumers who would prefer to browse and purchase in person are shopping online by necessity. Businesses have responded by investing more than would otherwise have been justifiable in new technology, infrastructure, organisational change – and advertising. This includes brand advertising to promote ecommerce platforms, performance advertising to direct traffic to them, and advertising within these platforms (‘retailer media advertising’) to promote specific products, all of which have surged.

Over the last six months it has become clear that booster shots are necessary to maintain the effectiveness of vaccines, that the fully vaccinated are able to pass on infections quite readily, and that substantial pockets of the population are unwilling to be vaccinated at all. Progress towards containing COVID-19 has been slower than expected, and consumers have been less willing to resume in-person shopping. Businesses have continued their heightened investment in digital transformation, during a period in which many expected to ease back as consumers returned to shops. Digital advertising has therefore been stronger in the second half of this year than previously expected. Zenith now estimates that digital advertising will grow by 25 per cent year-on-year in 2021, compared to the 19 per cent estimated in the previous forecast, published in July.

Zenith expects digital transformation to slow down, but not go into reverse, as the pandemic eases in 2022 and beyond. The pandemic has accelerated trends that were already fundamentally reshaping the economy, and will continue to do so. Zenith forecasts 14 per cent growth in global digital adspend in 2022, up from the previous forecast of 10 per cent, followed by nine per cent growth in 2023 and 10 per cent in 2024.

Zenith’s national head of digital and data, Joshua Lee said, “In Australia, digital ad spend has bounced back and forecasted to increase by 21 per cent to $11.2bn from last year. With double-digit growth across all channels and online retail sales growing by 25 per cent, the retail category will continue to thrive as brands invest in digital transformation. Accelerating a direct-to-consumer and first-party data strategy will require brands to move away from just the transactional and include experiential customer experiences across paid and owned channels. This will create more positive brand and online shopping experiences, reinforcing e-commerce behaviours and loyalty well after the pandemic.

For media owners, Australia’s largest publishers are in a race to build out their own identifiers before third-party cookies depreciate in 2023. Data ownership through digital transformation will help steal share from the walled gardens where Google, Facebook and YouTube currently make up more than 80 per cent of Australia’s digital advertising market.”

Advertising is contributing more to the global economy

This structural change in the economy means that advertising is playing a greater role in driving sales growth through ecommerce. In particular it has sparked a surge in retailer media advertising: display or search advertising that appear on ecommerce platforms.

Retailer media can be highly effective, allowing brands to target active buyers at the point of purchase. Zenith estimates that retailer media advertising surged from 24 per cent growth in 2019 to 53 per cent in 2020, and then 47 per cent in 2021, when it totalled US$77bn. This is equivalent to the sums spent on newspaper, magazine, radio and cinema advertising combined, and accounts for 20 per cent of all expenditure on digital display and paid search advertising. By 2024 retailer media adspend is expected to reach US$143bn, and 27 per cent of display and search. Much of this will be incremental to existing ad expenditure, coming from commercial budgets previously used to negotiate for shelf space in bricks-and-mortar stores.

The rise of the digital economy has also stimulated other forms of advertising, including brand campaigns on television and out-of-home, where digital brands are now prominent. The share of global GDP contributed by advertising had been rising steadily before the pandemic, from 0.72 per cent in 2014 to 0.75 per cent in 2019. After the step-change in digital media consumption and ecommerce last year, it is forecast to reach 0.77 per cent in 2021 and 0.80 per cent by 2024. This will be the biggest rise in advertising’s share of GDP since the late 1990s.