Ad Outlook Helped By Global Economy: World GDP On Upward Trajectory
Despite current worries about the near-term economic outlook, a new study from consultant Bain forecasts that the global economy will expand at a 3.6% annual rate for the foreseeable future, resulting in the world Gross Domestic Product swelling to $90 trillion by 2020 -- 40% larger than it is today.
If historical trends don't shift radically, that growth should translate to good news for the advertising industry over the same time period. Traditionally, ad growth has tracked GDP growth consistently, with ad expenditures equating to between 2% and 2.5% of GDP.
Bain also reported that in advanced economies, a significant proportion of GDP growth will come from a broad range of incremental improvements to existing goods and services.
One implication for businesses, the consultant said, is that "marketing, customer research, process improvements and business model inventions will continue to be critical to creating incremental economic value above and beyond stealing share."
The Bain report also stated that the rising wealth of emerging economies will continue to bring a broader range of goods to huge numbers of new consumers. More will cross the annual household income threshold of $5,000, defined as the bottom threshold for entering the middle class globally.
However, some countries -- like China -- will be more prosperous; peak income will average about $18,000 per year in current dollars. Overall, the increases in various countries give global citizens an opportunity for discretionary spending.
That emerging market middle class will not have the same level of discretionary income as the middle-class consumers in more advanced economies, Bain notes.
But their numbers alone -- Bain estimates that another 1 billion consumers will be classified as middle class over the next decade --will create an enormous new market. Estimated contribution to global GDP by 2020: $10 trillion.
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