Forecast: Social media adspend to overtake TV in 2022
December 7, 2021
The global ad market will continue its 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. Global adspend will expand by 5.7 per cent in 2023 and 7.4 per cent in 2024, with brands looking to leverage more social media, online video, advanced TV, and ecommerce channels.
Advertising across all digital channels will exceed 60 per cent of global adspend for the first time in 2022, reaching 61.5 per cent of total expenditure; their share will rise to 65.1 per cent by 2024.
Zenith estimates that global adspend will reach $705 billion (€626.5bn) in 2021, up from $634 billion in 2019, and will rise to $873 billion by 2024.
While the emergence of the omicron variant is not factored into this forecast, it will increase the risk of more set-backs to the travel, hospitality and bricks-and-mortar retail sectors, and may cause further shifts into ecommerce and digital advertising.
Accelerated ecommerce fuels surge in digital adspend
The pandemic has disrupted shopping habits, rapidly accelerating the adoption of ecommerce. Businesses have responded by investing 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. Zenith estimates that global digital advertising will expand 25 per cent year-on-year in 2021.
Investment in ecommerce channels has risen as more people are shopping online as a necessity and have increased their comfort level for discovery and purchase via digital channels. As consumers return to shopping in person, we’ll see some rebalancing of marketing towards in-store communication. Zenith forecasts 14 per cent growth in digital adspend in 2022, and 9 per cent in 2023 and 10 per cent in 2024.
These forecasts are ahead of those Zenith published in July, when it forecast 19 per cent growth in digital adspend in 2021 and 10 per cent in 2022. The pace of digital transformation has been higher than expected, as progress towards containing Covid-19 has been slower and consumers have been wary to resume in-store shopping. Varying opinions about vaccine effectiveness and willingness to obtain the vaccine have delayed the return to stores, causing brands to maintain a greater reliance on ecommerce and digital channels than previously forecast.
Advertising is contributing more to the global economy
The structural change in the economy towards ecommerce means that advertising is playing a greater role in driving sales growth. 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 $77 billion. 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 $143 billion, 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.
C&E Europe and MENA will grow fastest, but most new ad dollars come from the US
Adspend in all regions is now well above pre-pandemic levels, and all are expected to grow healthily over the next few years. Zenith forecasts the fastest growth between 2021 and 2024 to come from Central & Eastern Europe (C&E Europe) and the Middle East & North Africa (MENA), with average annual growth rates of 12.2 per cent and 10.0 per cent respectively. C&E European advertising is being fuelled by the rise in productivity and disposable incomes as its economies develop towards maturity, encouraging more brands and product categories to enter the market. MENA, meanwhile, is benefiting from high oil prices as demand for energy has outpaced production. The slowest-growth is expected from the mature markets of Western Europe, where growth is forecast at a healthy 5.3 per cent a year.
However, Zenith expects the biggest contribution to the growth in ad dollars to come from the US, where adspend is forecast to expand by $80 billion between 2021 and 2024. That represents 48 per cent of the entire growth in global adspend over this period. The next-largest growth will come from China ($15.8 billion, or 9 per cent of the total), the UK ($6 billion, or 4 per cent) and Japan ($5.4 billion, or 3 per cent). These are the world’s four largest ad markets, and make up in scale what they may lack in speed.
Social media is leading ad growth and will overtake television next year
Zenith predicts social media will be the fastest-growing channel between 2021 and 2024, with an average annual growth rate of 14.8 per cent, closely followed by online video at 14.0 per cent. Paid search will grow by 9.8 per cent a year, primarily driven by retailer media, and out-of-home will enjoy solid 7.4 per cent annual growth as foot and vehicle traffic return to normal. Radio and television will grow marginally, by 2.2 per cent and 1.4 per cent respectively, while print declines by 4.7 per cent.
Social media is becoming more competitive. According to eMarketer, adult social media users in the US are spending 60.4 per cent of their time with Facebook and Instagram this year, down from 74.8 per cent in 2017. That’s the result of the rise of TikTok, which grew from nothing to 15.1 per cent of social media usage over this period. The platforms are also embracing commerce and developing new advanced interactions between brands and consumers. Brands can use self-serve tools to create Augmented Reality experiences and then distribute them through targeted advertising, which can effectively lift awareness and intent to purchase.
Zenith expects social media adspend to reach $177 billion in 2022, overtaking television at $174 billion. Social media adspend will rise to $225 billion by 2024, when it will account for 26.5 per cent of all advertising, followed by paid search at 22.5 per cent and television at 21 per cent.
Streaming and advanced TV are fuelling a rapid shift from linear to online video
Linear television advertising remains the frequent default route to mass-audience brand awareness, despite years of audience losses to online video across multiple platforms. Brands’ reliance on television, coupled with falling supply, is stimulating rapid media inflation, which will continue even after the comparison with 2020 has passed. Zenith forecasts the cost of television advertising to rise by 11 per cent in 2022, compared to 4 per cent for out-of-home, 3 per cent for digital display, 2 per cent for radio and zero for print. The widening disparity in prices means brands will have to rethink their budget allocation, and ensure they’re reaching audiences in the right place and at the right price.
The rise of advanced TV and the delivery of streaming video to television sets and mean online video advertising has more impact than ever. Combined with the continued rise of digital audiences, this will drive online video adspend to increase from $62 billion in 2021 to $91 billion in 2024, when it exceeds 50 per cent of this size of television for the first time. Linear television adspend will rise from $171 billion to $178 billion over the same period.
“As consumers rely ever more on digital technology to connect and entertain them, and to inspire and fulfil their purchases, advertising is playing a greater role in driving sales and brand growth,” said Jonathan Barnard, Head of Forecasting, Zenith. “Over the next three years we expect the ad market to achieve its highest rate of sustained growth since 2000.”