Social media in-feed ads, online video and other digital formats such as paid content and native advertising are leading the growth in global advertising. Between 2016 and 2019, they will drive 14 percent annual growth in total display advertising – a category that includes these formats as well as traditional banners – according to Zenith’s new Advertising Expenditure Forecasts. Total display expenditure will rise from $84 billion to $126 billion over this period, accounting for 64 percent of all the growth in global ad expenditure. By 2019, total display will account for 50.4 percent of Internet advertising expenditure, exceeding 50 percent for the first time.
Where is the growth coming from?
Most of this growth is coming from social media, which will grow at 20 percent a year, and online video, which will grow at 21 percent a year.
Social media is central to many of its users’ digital lives – it’s where they plan their social life, read their news and document their activities – and brands can use it to communicate with them very effectively.
And online video is much better at conveying brand values than traditional display formats like banners. These are no longer mutually exclusive categories; indeed video advertising is now central to the growth strategies of most social media platforms.
Paid search and classified are growing, but are lagging behind
Paid search was the largest Internet advertising channel until 2015, when it was overtaken by display. Much of its recent growth has come from innovations in mobile and location-based search, and future growth will come from adapting search ads to voice-activated personal assistants like Siri and Alexa. Expenditure on paid search totaled $78 billion in 2016, and Zenith forecasts a ten percent annual growth to 2019, when it will reach $103 billion. Growth in paid search will therefore lag behind growth in total Internet advertising, which will grow at 12 percent a year.
Classified advertising – advertising on dedicated web pages without editorial content, often for cars, house and jobs – was an important part of the early Internet, but its share of total Internet expenditure has been shrinking for many years as users have turned to free listings, auction sites and other substitutes. In 2016, advertisers spent $17 billion on Internet classifieds, and Zenith expects this total to rise by just seven percent a year to $21 billion in 2019.
Television and online video consolidate their lead in brand advertising
The distinction between television and online video advertising exists because they are distributed differently, generally sold differently and categorized differently by third-party agencies that monitor advertising expenditure. But, for many consumers, they are beginning to blur together as smart TVs and other devices deliver Internet content to households’ main TV sets. Advertisers are also finding that it makes less and less sense to plan television and online video separately: they work best as complements rather than substitutes. Television supplies reach, while online video offers targeting and personalization. Together they are becoming more important than ever to advertisers seeking to build brands. Stripping out classified and search – which are essentially direct-response channels – television and online video accounted for 48.5 percent of expenditure on brand advertising in 2016, up from 43.7 percent in 2010, and Zenith forecasts their market share to rise to 49.3 percent in 2019.
Global ad spend to grow four percent this year
Zenith forecasts that global advertising expenditure will grow four percent to $558 billion by the end of 2017. This is down fractionally from the forecast of 4.2 percent that Zenith made in June. The stronger eurozone economy has yet to feed through to advertising, and Zenith has downgraded its forecasts for seven eurozone markets since then. Mexico’s television market has been disappointingly weak; the extended period of mourning for King Bhumibol Adulyadej has led to a second year of decline for Thailand; and Malaysia’s recovery from the downturn of 2016 has been less rapid than Zenith hoped. These disappointments have been partially offset by the boost provided by Canada’s healthy economy to its ad market, and Russia’s return to full growth after the oil-price crash and imposition of trading sanctions.
Next year, Zenith forecasts a 4.2 percent growth in global ad spend, boosted by the Winter Olympics in Korea, the football World Cup in Russia, and the mid-term elections in the US.
30 continuous years of advertising forecasts
The first edition of the Advertising Expenditure Forecasts was published thirty years ago, in September 1987. The report was originally published by Saatchi & Saatchi, before moving over to Zenith soon after it was created in 1988. Back then the global ad market was a lot smaller – estimated at $187 billion, or a third of the current level – and it was overwhelmingly dominated by the US, which accounted for 59 percent of total spend, compared to 35 percent today. The birth of Internet advertising, now nearly 40 percent of the market, was still seven years in the future. But not everything changes: even then Zenith was looking forward to a boost from the 1988 Olympics and US elections, expected rapid growth in Asia Pacific outside Japan, and worried about economic problems in Latin America.
“Internet display is coming into its own as a brand-building media, powered by social media and online video,” says Jonathan Barnard, head of forecasting and director of global intelligence at Zenith, in a press statement. “But the distinctions between online video and traditional television are being eroded, and the two work together much better than they do separately.”
“Internet platforms are continually innovating to provide advertisers with new ways of communicating with consumers,” adds Vittorio Bonori, Zenith’s global brand president. “But newer doesn’t always mean better, and agencies must use all the data and technology available to them to determine how to combine new and old media to tell brand stories most effectively.”