The demand for advertising has risen steadily over the past decade. In order to maintain market share, big brands need to be known by buyers and potential new customers, which requires regular campaigns to build brands with a wide reach. The same applies to smaller brands looking to expand their business. Meanwhile, small companies that may not have previously advertised at all have targeted advertising on digital platforms, injecting new demand into the market.
Since 2010, advertising expenditure has risen by an average of 5.1%. The traditional broad impact is declining: first in the print sector and now also in TV in key markets. Many viewers are replacing linear TV with ad-free video platforms such as Netflix, Amazon Prime Video, HBO and Disney+, reducing the available audience and creating fragmentation.
The use of ad blockers means that some target groups are only exposed to a small amount of digital advertising. The resulting increase in demand and decrease in supply is leading to a rapid rise in prices. According to the Zenith study, the supply of viewers has fallen by an average of 1.3% per year since 2010, while media inflation has averaged 6.5% per year.
"Long gone are the days when we could find the audience in one place. Thanks to new technologies, we are now reaching them - online and offline - and regaining value for our customers through efficiency and effectiveness by ensuring we target and reach consumers along the consumer journey with the right message at the right time," says Matt James, Global Brand President at Zenith.
US-China trade war against the quadrennial in 2020
2020 is considered a so-called quadrennial, which only recurs every four years, and thus benefits from the Summer Olympics, Uefa Euro 2020 and the US presidential election. This stimulus is expected to add 7.5 billion US dollars in advertising spend to the global advertising market. Under normal circumstances, spending growth in 2020 would be slightly higher than this year's growth rate.
However, the forecast growth of 4.3% next year is barely above the estimated growth of 4.2% for 2019. The trade dispute between the US and the People's Republic of China is disrupting economies around the world, disrupting supply chains and diverting trade and investment. As a result, growth is being reduced and uncertainty is increasing, making advertisers more cautious in their financial planning. It is estimated that these economic headwinds will cost the global advertising market 1.1 percentage points of growth in 2020. Otherwise, the market would have grown by 5.4 percent.
India will make second-largest contribution to advertising growth
Despite the trade conflict, the US and China continue to lead the world in terms of increased spending. The US advertising market is expected to grow by USD 39.1 billion and China by USD 10.3 billion between 2019 and 2022. Together, they will account for 56% of the total growth in advertising expenditure over the next three years. China's growth rate is slowing as its own advertising market matures.
After years of being a production-driven, high-growth economy, China is now transforming into a consumption-driven, developed economy and its advertising market is becoming increasingly similar to that of other industrialized countries. Chinese advertising expenditure is forecast to grow by 4.1% in 2020, compared to 4.8% in the US. India will make the third-largest contribution, growing by USD 4.3 billion between 2019 and 2022.
Indian advertising expenditure is growing steadily in the double-digit percentage range. The projected growth for 2020 is 12.4 percent, 12.9 percent in 2021 and 12.6 percent in 2022. The Indian advertising market has great potential for long-term growth, contributing only 0.3% to GDP this year compared to 0.6% in China and 0.7% globally. At current rates of development, India will overtake China as the main source of growth in the Asia-Pacific region and the second largest in the world by the mid-2020s.
Online videos and social media continue to lead growth
Online video and social media will remain the fastest growing advertising channels between 2019 and 2022, growing by an average of 16.6% and 13.8% per year respectively, mainly due to the continued rise in smartphone usage. Cinema will be in third place with annual growth of 11.5%, driven by rising demand in China, but will only account for 0.9% of global advertising expenditure in 2022.
TV will not see any growth in the next three years as price inflation compensates for the decline in global viewership. Print prices are also rising, but not fast enough to compensate for the ongoing and rapid decline in readership. Advertising expenditure for newspapers will fall by 4.5% per year and for magazines by 8.1% per year until 2022.
"With geopolitical tensions wiping out most of the expected gains from sports and elections, 2020 will be a disappointing quadrennial," says Jonathan Barnard, Head of Forecasting at Zenith. "Once the trade war is resolved, we are more optimistic for 2021 and forecast 4.5 percent growth in global advertising spend despite the absence of the quadrennial."