Global advertising expenditure will grow 11.2 per cent in 2021, driven by exceptional demand for performance-led ecommerce advertising and brand advertising on online video, according to Zenith’s latest Advertising Expenditure Forecasts report. Advertising expenditure will total US$669 billion this year, US$40 billion more than was spent before the pandemic in 2019.
Growth in advertising expenditure is expected to remain robust in the medium term, with 6.9 per cent growth forecast for 2022 and 5.6 per cent for 2023.
In Australia, Zenith’s national head of investment, Elizabeth Baker (main photo) said total adspend is forecast to grow 9.1 per cent in 2021, but will trail 2019 investment levels by approximately five per cent, as some channels experience a slower recovery.
“The adspend recovery this year has been quicker and stronger than expected, particularly across television and digital. We have yet to understand what, if any, impact the latest series of lockdown restrictions will have on ad revenue and our forecasts are predicated on an assumption that restrictions will be relatively short-lived and will not lead to another media revenue crash, as seen in 2020. It’s likely that TV will reach 2019 levels of investment, while digital was the only channel not to decline in 2020 and is continuing to surge in 2021. Other channels may not see 2019 levels of ad spend until 2023,” Baker said.
Zenith’s national head of digital and data, Joshua Lee added given current restrictions, Australia is forecast to see digital ad spend grow by 6.6 per cent compared to last year, and rise 8.8 per cent from pre-COVID 2019. This gives confidence that digital consumption and the total internet market (excluding gains from BVOD and streaming audio) is poised for sustained growth of 5-6 per cent over the next three years.
“Although search growth has slowed at two to three per cent versus nine per cent pre-COVID, performance media spend is being diversified into growth channels like ecommerce marketplaces and social platforms catering to inspiration and shoppable experiences. With a rising emphasis on mid- to-lower funnel, building brands across all channels should not be forgotten and seen as an advantage in the shift to digital commerce. Leaning into high attention and emotion eliciting channels, like online video and social media, can help brands consistently create future demand as the market fully recovers and accrues competition,” Lee said.
Globally, the coronavirus pandemic has accelerated the structural shift in the economy from bricks-and-mortar sales to ecommerce, driving more consumers than ever to research and complete purchases online. Brands have responded by forming partnerships with retailers and creating new direct-to-consumer operations, using performance-driven advertising – primarily in social media and paid search – to lead consumers down the path to purchase. Zenith forecasts that social media advertising will expand by 25 per cent this year to reach US$137 billion, overtaking paid search in scale for the first time. Paid search will expand by 19% to reach US$135 billion.
Much of this is new money to the ad market, coming from small businesses that have had to pivot rapidly to ecommerce to survive lockdowns, and from budgets that brands would previously have allocated to retailers to secure physical shelf-space, which they are now spending on display and search ads on retailer websites. The shift to ecommerce will slow down as coronavirus restrictions lift and economies open up again, but won’t go into reverse. Zenith expects ecommerce to continue to pull in incremental revenues to the ad market, driving 13% growth in social media and 12% growth in search in 2022.
Audiences continue to migrate online, and online video viewing is growing rapidly, even as traditional television ratings shrink again after a one-off spike when lockdowns began in 2020. Advertisers value online video as a means of maintaining reach while television declines, but it’s an effective form of brand communication in its own right. Demand is strong, although the popularity of subscription-funded video-on-demand has helped limit the supply of high-quality online video available to advertisers. Zenith predicts that online video advertising will be the fastest-growing digital channel in 2021, rising by 26 per cent to reach US$63 billion.
“The online video landscape continues to transform, fuelled by the growth of streaming services and connected TVs,” said Benoit Cacheux, global chief digital officer at Zenith. “Its continued evolution requires a radical rethink of how to build the optimal screen-neutral reach model. The ingestion of new data sources into TV planning also creates further opportunities to further sync TV and video planning.”
Social media and online video have eclipsed traditional static display, which is forecast to shrink by 15 per cent this year, while online classified grows by just four per cent. Overall, Zenith expects digital advertising to grow by 19 per cent in 2021, and increase its share of total adspend to 58 per cent, up from 48 per cent in 2019 and 54 per cent in 2020.
Most other media are enjoying growth this year, as spending rebounds from the 16 per cent drop in traditional media adspend in 2020. Cinema and out-of-home were the worst affected by COVID-related restrictions, shrinking by 72 per cent and 28 per cent respectively, and will enjoy the fastest recovery in 2021, with respective growth rates of 116 per cent and 16 per cent. Radio advertising, which shrank by 22 per cent in 2020, is forecast to grow by our per cent in 2021, while television fell eight per cent in 2020 and is forecast to grow one per cent in 2021. Print will continue its long decline, now in its 14th consecutive year, with an eight per cent drop in adspend in 2021. In 2023 adspend in all these media will still be below 2019 levels, though cinema and out-of-home will have made up almost all of their lost ground.
Limited supply and rising demand are stoking media inflation
This year’s rapid recovery in adspend, coupled with the continued migration of audiences from traditional to digital channels, is fuelling substantial increases in media prices, particularly in television. The cost of television advertising is up five per cent this year on average, though the variance between markets and audiences is wide. Television spend is up by one per cent, so the volume of audiences reached globally is shrinking. Digital media growth, in contrast, is mainly driven by rising audiences and more extensive monetisation, with online video inflation averaging seven per cent, and social media roughly flat, compared to their 26 per cent and 25 per cent respective adspend growth rates.
US to add nearly half of all new ad dollars
All regions will enjoy robust adspend growth in 2021, ranging from nine per cent in Asia Pacific to 15 per cent in the Middle East and North Africa, which is recovering from the steepest decline in 2020, of 21 per cent. The strongest underlying growth since 2019 is taking place in North America, which is forecast to grow by 13 per cent this year despite shrinking by only one per cent last year. Growth in North America is being driven by the very rapid pace of digital transformation in its industries, as well as strong investment in connected TV and advertising-funded video-on-demand.
The US will be by far the largest contributor to global growth in 2021, accounting for 46 per cent of the US$67 billion added to the global ad market this year, followed by China with 11 per cent, and Japan and the UK with six per cent each.
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