Group M
A weakening global economy has led GroupM to downgrade its worldwide advertising growth forecast for 2020 to $628 billion, or 3.9%. That’s a pare-back from the company’s June estimate of 4.8% growth.The firm has also revised downward its growth estimate for 2019 to 4.8% from June’s estimate of 5.7%. 
Global ad growth in 2021 is now pegged at 3.1%, followed by growth for the next three years at between 3% and 4%.
“The global economy has weakened in 2019 and will remain similarly soft in 2020,” according to the report, “This Year Next Year,” which was penned by Brian Wieser, GroupM’s global president, business intelligence.
He notes that worldwide real gross domestic product is forecast to slip to 2.5% in 2020 — a slight dip from this year’s 2.6%.
If that forecast proves accurate, Wieser wrote, it would be “the slowest pace of growth in any non-recession/non-recovery year over the past two decades.”
The good news: personal consumption expenditures are holding up pretty well, which Wieser asserts has probably helped sustain marketing growth in 2019. It’s expected to decline, “but only modestly in the years ahead.”
That said, industrial production is showing “pronounced weakness” both this year and next. That and slowing global trade do not augur well for big gains in ad expenditures.
As in the U.S., Wieser writes, a substantial share of global advertising is now accounted for by digital-first brands that are “endemic to the internet. Based upon their securities filings, we can see that Alibaba, Alphabet, Amazon, Booking.com, eBay, Facebook, IAC, JD.com, Netflix and Uber are each now $1 billion+ advertisers, accounting for $36 billion in spending during 2018, up by a quarter over 2017 levels.”
Growth in 2019 is likely very similar, Wieser adds.
Those digital giants, along with a couple dozen other big firms, combined account “for a majority of the world’s growth in spending on advertising. To the extent that these companies tend to take shares of consumer spending from others and do not directly cause the global economy to expand, at some point their growth converges with global averages, resulting in slowing growth in spending as well.”
The U.S. remains by far the largest ad market, at around $250 billion. China is number two at $90 billion, and Japan is third at about $40 billion. Rounding out the top five markets are the UK and Germany. France, at number six, is likely to be overtaken by India and Brazil by 2024.
Globally, GroupM estimates that television ad revenue declined by -3.6% in 2019, excluding U.S. political advertising (or -5.5% including it). Despite the inclusion of digital extensions associated with TV in some markets (including the U.S. and U.K.) and various other advancements, “TV is unlikely to grow in the future on an underlying basis, and we expect just under $170 billion in annual ad revenue each year through 2024.
Internet-related advertising, per the GroupM report, “is now unambiguously the most important medium globally, with $326 billion in ad revenue during 2020, up from $294 billion in 2019.”
Digital will account for 52% of global advertising in 2020 and is “taking share of advertising in almost every country in 2019 and should do so in all of them in 2020.” Digital now accounts for more than 60% of total advertising in several markets, including China, the U.K., Sweden and Denmark.
Together TV and digital account for approximately 80% of all advertising.
Zenith
Global ad spend is projected to grow 4.3% in 2020, according to Zenith’s Advertising Expenditure Forecasts. Next year’s growth rate will be just slightly above 2019’s 4.2%, which Zenith calls a “big disappointment” given the presence of the Summer Olympics, UEFA Euro 2020 and the U.S. Presidential elections, which by its estimate will add $7.5 billion to the global market.
“As geopolitical tensions wipe out most of the expected gains from sport and elections, 2020 will be a disappointing quadrennial year for the ad market,” explains Jonathan Barnard, head of forecasting, Zenith. “If the trade war [between China and the U.S.] is settled, we are more confident for 2021, forecasting 4.5% growth in global ad spend despite the absence of the quadrennial events.”
Zenith expects the U.S. ad market will grow by $39.1 billion between 2019 and 2022, while China will grow by $10.3 billion. Together they will account for 56% of all growth in ad expenditure over the next three years.
China’s growth rate is slowing, however, as its ad market matures. Chinese ad spend is forecast to grow 4.1% in 2020, compared to 4.8% in the U.S.
India’s ad market will grow $4.3 billion between 2019 and 2022. Indian ad spend is steadily increasing by double-digit rates, with growth forecast at 12.4% in 2020, 12.9% in 2021 and 12.6% in 2022, estimates Zenith.
Online video and social media will remain the fastest-growing channels between 2019 and 2022, growing respectively by 16.6% and 13.8% a year on average, thanks mainly to continued increases in consumption on smartphones.
Cinema will be in third place with 11.5% annual growth, driven by surging demand in China, but will still only account for 0.9% of global ad spend in 2022.
Television will record zero growth over the next three years, as price inflation counterbalances the decline in global audiences.
Print continues its slow decline. Newspaper ad spend will shrink by 4.5% a year to 2022, and magazines will shrink by 8.1% a year.
One big concern that Zenith explores is the uncertainly over vanishing eyeballs. Many viewers are replacing television with non-commercial video like Netflix, Amazon Prime Video, HBO, reducing available audiences and creating evermore fragmentation.
The use of ad blockers means that some audiences have low exposure to digital advertising. Advertisers are unable to recapture their attention. This rising demand and falling supply is increasing prices.
The supply of commercial audiences has shrunk by 1.3% a year on average since 2010, according to Zenith research, while media inflation has averaged 6.5% a year.
“The days when we could find audiences all in one place are long gone,” says Matt James, global brand president, Zenith. “Now, however, technology empowers us to find them wherever they are, online or offline, and win back value for our clients through efficiency and effectiveness — by ensuring that we target and reach consumers with the right message at the right point in the consumer journey.”
Magna
Interpublic’s research unit Magna forecasts that global advertising spend will increase 4.6% in 2020 on an underlying basis. Including cyclical events like the U.S. political elections and Olympics, the figure rises to 5.7%.
That’s on top of 5.2% growth in 2019.
In the U.S., underlying ad-spend growth for 2020 is pegged at 4.4% with total growth of 6.6%, which includes political and other cyclical events.
Ad spend grew in 62 of the 70 countries analyzed by Magna, including all the top markets this year: the U.S. 5%, China 9%, Russia 7%, India 13%, UK 7%, and Germany 2%.
Magna found that global linear television ad revenues shrank by 4% this year, the poorest performance since 2009, as pricing increases no longer offset the accelerated decline of linear audiences, especially in an odd-numbered year without cyclical events/drivers.
Print ad sales declined by 10%, in line with previous years, while radio advertising revenues were stable. Out-of-home advertising was the only traditional media to show significant growth (6%), driven by digital OOH revenues (20%).
In the U.S., national television advertising sales declined by an estimated -3% to $42 billion this year and will decline further in 2020 as a slowing economy may impact ad spend from major categories like automotive.
Ratings decline and CPM inflation are both accelerating in a “scissors” effect but pricing strength no longer offsets volume weakness to stabilize revenues. “Even factoring the incremental ad revenues generated around the Summer Olympics ($750 million), nominal growth will be -1% in 2020,” Magna concludes.
On the plus side, technology and entertainment categories will increase their TV spend in 2020 to support product launches, including a number of newly-launched streaming services, offsetting most of the cuts from other industries.
Vincent Letang, executive vice president, global market intelligence, who wrote the report, stated that while the global ad market rose about 5% in 2019 “it was the result of the U.S. market growing beyond expectation while the rest of the world grew less than expected.”
“Ironically,” added Letang, “while the U.S. and Chinese economies remain strong so far, despite the trade war and marketing spend grew strongly in both markets this year, the trade war made collateral casualties in several countries depending on US or China trade, and marketing spending was hit.
“Three growth engines should mitigate the global economic slowdown expected in 2020, to generate an eleventh year of growth for advertising spending and revenues. The return of cyclical events (with record political spending in the US), the marketing activity of the tech and entertainment sectors and the reallocation of trade marketing budgets from brick-and-mortar retail to ecommerce platforms’ product search.”