WPP’s media investment group GroupM has affirmed its 2016 global ad expenditure forecast and shared its revised outlook for 2017. A variety of economic factors across the globe see another year of modest growth in advertising as brands continue to be pressured for performance in low-growth environments. Despite the overhang of uncertainty tied to outcomes of the US Presidential election and the UK referendum on departing the European Union, advertising budgets have not yet been impacted. China and other ‘new world’ countries continue to over-contribute to global growth, but a new normal more modest level of growth has settled in. Digital advertising continues to be the chief beneficiary of growth.
2017 advertising is predicted at $547 billion [$516bn] (+ 4.4 per cent), with digital’s share to reach 33 per cent. In 2016, digital captured 72 cents of every new ad dollar (USD), and TV 21 cents. In 2017, digital will capture 77 cents per new dollar, TV will get 17 cents. The US and China account for half of all net growth in the 2016 and 2017, with China taking back a narrow lead over the US.
With late-year growth, GroupM China revises 2016 to +7.8 per cent, up from 6.6 per cent predicted earlier. FMCG advertising rose 4.6 per cent in the second quarter year-on-year, much faster than the 2.0 per cent growth forecasted. Continuing urbanization and solid consumer confidence lend ample support for continued growth, but China no longer boasts recent double-digit rates. Coming from peak growth, GroupM expects digital advertising in China will grow 29.5 per cent in 2016 and slow to 21.5 per cent next year.
The US remains the other principal growth contributor. GroupM fractionally upgrades 2016 growth from 3.1 per cent to 3.2 per cent. This includes revising TV from 3.4 per cent to 4.1 per cent, matching growth in the preceding election years (2012, 2014). This year’s less robust election spending was compensated with Summer Olympics demand. There was some redirection of budgets from digital to TV, particularly by the pharmaceutical and CPG categories. For 2017, GroupM shaves growth to 2.6 per cent on the basis of the weak global and US GDP growth, and political uncertainty which as yet has not impacted budgets.
The UK Brexit vote has impacted financial markets, but to date has not impacted advertising. GroupM recently revised its UK forecast up to a digital-fuelled 7 per cent annual run-rate, delivering a prospective $3.0 billion incremental investment over the two years 2016-2017. This compares to $3.3 billion from the rest of the EU combined.
Elsewhere in the BRICS, GroupM sees that Brazil is emerging from recession, after reaping Olympics benefits. There is increased digital adoption, particularly in mobile; since the beginning of the year mobile users grew 22 per cent to reach 74 million. Modest ad growth of 2 per cent in 2017 is predicted, enough to keep Brazil the world’s number-five ad economy (USA, China, Japan, UK, Brazil, Germany).
India remains, by far, the fastest growing market in the world’s ten, $10 billion-plus ad markets. Growth is forecast at 13.8 per cent in 2016 and 12.5 per cent in 2017, with an economy fuelled by low interest rates, sustained urban demand and the impact of key reforms.
Russia’s rapid recovery since the first quarter continues, prompting revision of the 2016 forecast up to 9.5 per cent. Higher demand for TV in Q4 and growth in paid search are key contributors. While over half of paid search demand is from smaller businesses that cannot afford other media, demand from larger advertisers is strong as well. Ten per cent growth is predicted for 2017, driven by TV and Internet.
Prediction intelligence is drawn from WPP’s worldwide resources in advertising, public relations, market research and specialist communications and is published in This Year, Next Year by GroupM’s Futures Director, Adam Smith. “Ad growth has shadowed the global economy’s long, low and level recovery cycle since 2010. These new forecasts emphasise the ad story of our times is however structural, not cyclical. Twenty years on from the Internet becoming a measured ad medium, digital remains the engine of advertising growth and disruptor-in-chief of the entire marketing economy,” remarked Smith. “This multiplies options, opportunities and risk. The importance to advertisers of autonomy and diligence has never been higher.”