There are bright days ahead on the advertising expenditures front. Global ad spend is projected to grow 4.9% to $545 billion in 2015, according to ZenithOptimedia's (ZO) Advertising Expenditure Forecast, although this is slightly below 2014's 5.1% due to tough year-on-year comparisons from the Winter Olympics, World Cup, and the U.S. midterm election.
However, the report expects 2016 to be a quadrennial year with 5.6% ad growth propelled by the Summer Olympics, U.S. Presidential elections and the UEFA European Football Championship. Then, growth slips back to 5.2% in 2017 because of an absence of these types of momentous events.
The U.S. will lead the global market in new ad spend between 2014 and 2017, accounting for 25% of the $86 billion in additional expenditures. China comes in second at 19%, followed by Argentina at 7% and the UK at 5%.
There are three key factors driving future ad spend growth: mobile, social media, and the transition to programmatic buying of digital display, per the forecast.
“Mobile technology is creating new opportunities for brands to build relationships with consumers, while programmatic buying is making brand communication cheaper and more effective," said Steve King, ZenithOptimedia’s CEO, Worldwide. "Social media provides a strong example of how to advertise effectively on mobile platforms, and we expect mobile marketing to develop further as other media learn from this example."
One in five people in the world own a smartphone, which provides ample opportunity for advertisers. Mobile advertising is expected to grow by an average of 38% a year between 2014 and 2017, driven by the rapid spread of devices, innovations in ad technology and improvements in user experiences. In fact, mobile will account for 51% of all new advertising dollars between 2014 and 2017.
Still, there is a disconnect within this mobile segment. Mobile will account for 6.2% of all ad spend in the U.S. this year, yet eMarketer estimates it will occupy 23.3% of media consumption time. This uneven equation is partly because a lot of conventional display advertising does not work well on mobile. "Compared to desktop display, mobile banners take up more screen space, are considered more intrusive, and are more likely to annoy consumers than engage them. Because mobiles don’t accept cookies, retargeting and tracking from the ad to the purchase is usually impossible," says the report.
There’s one area, however, where digital display has proved very successful on mobile, and that’s social media. Facebook and Twitter are projected to receive 33% of all mobile ad spend in 2014, significantly above their 10% share of all digital ad spend. "Their ads are designed to blend seamlessly into the content feed -- they look native rather than intrusive. They can track all their users’ media consumption within their apps, and can tie that into their desktop activity through their login details. Social media provides a great example of how to adapt to mobile," says ZO, part of Publicis Groupe.
The transition to programmatic has given a sharp boost to traditional display. "Agencies are swiftly adopting programmatic buying, which allows them to target display ads accurately and efficiently," says ZO. "The technology has recently evolved to deliver better premium, brand-building experiences. This has provided a sharp boost to ‘traditional’ digital display, as well as video and social." Growth in traditional display increased from 14% in 2012 to 18% in 2013, and 26% in 2014, its fastest rate of growth since 2007.
Finally, TV may be on the downslide. Although TV's market share of global ad spend has steadily grown from 29.9% in 1980 to 39.6% in 2014, ZO says TV has peaked and will fall to 37.4% in 2017. At the other side, online video's share of global ad spend will increase from 1.9% in 2014 to 2.8% in 2017.
Meanwhile, the global economy is expected to improve, with the IMF predicting 3.8% global GDP growth in 2015, up from 3.3% in 2014.
Still, not all regions will recover equally. Latin America is expected to grow 10% a year through 2017, largely benefiting from the 2016 Olympics in Brazil. Emerging Asian markets, such as India, China, Pakistan, and Indonesia, are projected strong 10%-11% annual growth. The Middle East and North Africa, as well as Asian countries, Australia, New Zealand, Singapore, and South Korea will experience 4%-6% annual growth.
Japan will continue to struggle at 2% to 3% annual growth, and ZO doesn’t expect it to improve over its forecast period.
Europe, on the other hand, is poised to end 2014 with its first year of growth since 2010, with further improvement likely over the next few years. Greece, Portugal, Spain and Ireland all began to make strong recoveries in 2014, and over the next few years ZO expects them to substantially outperform the EU 2% average, growing at 5.4% a year through to 2017. France, meanwhile, will shrink at an average rate of 0.3% a year between 2014 and 2017, while Germany will grow by just 1.3% and Italy by 1.5%.
After many years of double-digit ad-spend growth, Russia’s ad market is forecast to grow just 1.8% this year and 1.1% in 2015, followed by 4.6% growth in 2016 and 9.2% in 2017. Ad spend in Ukraine will fall 49% in 2014 and 10% in 2015, followed by 6% recovery in 2016 and 2017 from a greatly reduced base.