According to ZenithOptimedia’s new Advertising Expenditure Forecasts, global ad spend will grow 4.4 percent to reach $544 billion in 2015, and will accelerate to 5.3 percent growth in 2016, boosted by the 2016 Summer Olympics in Rio and the US Presidential elections. Ad spend will then slow down slightly in the absence of these events, growing 4.8 percent in 2017.
ZenithOptimedia has, however, reduced its forecasts for ad spend growth in 2015 and 2016 by 0.5 and 0.3 percentage points respectively, primarily due to the deepening recession in Russia, Ukraine and Belarus, and a slowdown in growth in China. The agency’s forecasts for each year are above the average annual growth rate for the last 20 years (4.2 percent), and well ahead of the average for the last 10 years (2.8 percent).
Online video is the fastest-growing advertising category
Unsurprisingly, the fastest-growing advertising category is online video, thanks to the explosion of mobile video consumption and the spread of internet-connected devices, such as smart TVs and games consoles. Smartphones have bigger and better displays, and transmission technologies like 4G are improving connection speeds, making it possible for consumers to watch high-quality video content wherever and whenever they choose. According to the Ooyala Global Video Index, mobile devices accounted for 34 percent of all online video plays in Q4 2014, up from 17 percent a year earlier. Several other factors are contributing to online video growth: measurement agencies are investing in research to track consumers’ exposure to video ads across desktop computers, tablets and television screens; the main social media platforms are all developing their video products; and more online video is being sold by programmatic buying, providing advertisers with more control and better value. ZenithOptimedia estimates that global online video grew 34 percent to $10.9 billion in 2014, forecasts that it will grow at an average of 29 percent a year to reach $23.3 billion in 2017.
Deterioration in Eastern Europe
The conflict in Ukraine has severely disrupted the domestic economy, while Russia has suffered from sanctions imposed by the US and the EU, the sanctions it imposed in response, and a withdrawal of international investment. These shocks have been exacerbated by a sharp drop in the price of oil, which accounts for 70 percent of Russia’s exports, and devaluation of the Ukrainian and Russian currencies. These problems have since spread to Belarus, whose main trading partner is Russia, by some distance. International advertisers have responded by rapidly reducing their exposure to these markets, while domestic advertisers have been forced to cut their budgets to minimise their losses. The agency forecasts ad spend in Ukraine to shrink 62.3 percent this year, on top of a 51.2 percent decline in 2014. Russian ad spend grew just 4.3 percent in 2014, which was the first year of growth below double-digit rates since 2009, and the agency expects the market to shrink by 16.5 percent in 2015. It forecasts a 33.5 percent decline in ad spend in Belarus this year, following 7.6 percent growth in 2014. Between them, these three markets account for 2.1 percent of global ad spend, so their sudden decline has slowed but not derailed global ad spend growth.
China slows, but continues to grow at twice global rate
The Chinese economy is starting to slow after years of blistering growth – the technology gap with mature markets has narrowed, making productivity growth harder to come by; China’s previous debt-fuelled growth has left it with a large repayment burden; and the property sector is burdened by a large amount of unsold property. However, it is still growing at rates most other countries would regard with envy: GDP grew 7.4 percent in 2014 and the government has set a target of 7.0 percent growth in 2015. China’s ad market is slowing in step with its economy, but it too remains very healthy by international standards. According to the agency’s forecast, Chinese ad spend will grow 9.1 percent this year – below the 10.5 percent annual growth it averaged over the past five years, but more than twice the rate of the world as a whole. Between 2014 and 2017, the Chinese ad market is expected to enjoy an average growth rate of 8.5 percent a year.
Eurozone recovery on track despite worries about Greece
Although the election of its new Syriza-led government has raised concerns about Greece’s willingness and ability to reform its economy, pay its debts and even remain in the Eurozone, the recovery in Eurozone ad spend has remained on track. After shrinking 5.2 percent in 2012 and 2.5 percent in 2013, ad spend in the Eurozone grew 1.5 percent in 2014, and the growth is expected to continuously improve, though very gradually, from 1.6 percent in 2015 to 1.9 percent in 2017.
“Online video combines the emotional connection of television with the efficient targeting and measurable effectiveness of digital display. While television will remain dominant for many years to come, advertisers are increasingly utilising online video as an invaluable complement, giving them new opportunities to communicate brand values to consumers,” says Steve King, ZenithOptimedia’s CEO, Worldwide in a press statement.