Global ad spend is projected to grow 4.4% this year to reach $544 billion, according to ZenithOptimedia's (ZO) Advertising Expenditure Forecasts.
That’s a slight reduction from the shop’s initial forecast in December when it projected a 4.9% gain in 2015 ad spending. The agency has also reduced slightly its forecast for 2016 (by 0.3 percentage points) due to ongoing turmoil in Eastern Europe and China's economic slowdown.
Growth will be led by online video, which grew 34% to $10.9 billion in 2014 and is expected to grow at an annual average of 29% to reach $23.3 billion in 2017.
The online video expansion is being driven by several key developments, ZenithOptimedia says. In addition to the rapid adoption of smartphones and tablets globally and the spread of Internet-connected devices, such as smart TVs and games consoles, the industry has helped drive online video growth with improved attribution analytics and by deploying video products across social media platforms. Programmatic buying of online video has also helped to drive growth, ZO said.
“Online video combines the emotional connection of television with the efficient targeting and measurable effectiveness of digital display," says Steve King, ZenithOptimedia’s global CEO. "While television will remain dominant for many years to come, advertisers are increasingly utilizing online video as an invaluable complement, giving them new opportunities to communicate brand values to consumers."
Online video is joined by other rapidly growing Internet categories -- particularly social media, which is growing at a rate of 25% a year, and paid search, which is growing at an average rate of 12% a year through 2017.
Mobile advertising is expected to grow nearly 40% between 2014 and 2017 -- and by 2017, this segment will generate $75 billion, accounting for 12.7% of all expenditures. Furthermore, mobile is expected to contribute 62% of all incremental ad spend between 2014 and 2017, with TV coming in second at 23% and desktop Internet advertising at 18%.
Gains made by outdoor, radio, and theaters will be offset by declines in newspapers and magazines, driving an expected $9 billion drop in ad spend among those categories combined.
Ad growth is uneven on a global scale. North America was the first region to suffer the effects of the financial crisis, but it was also quick to recover, and ZO projects that North American ad spend will grow 3.5% in 2015, followed by 4% in 2016, with a boost from the Summer Olympics and the U.S. Presidential elections.
After years of rapid growth, China’s ad market is slowing, although it remains healthy. ZO forecasts that growth in that market will surpass 9% this year -- below the 10.5% 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, ZO expects the Chinese ad market to experience an average growth rate of 8.5% a year.
Now that China is slowing down, ZO expects Latin America to be the fastest-growing region for each of the next three years. The region is projected to experience 11.4% growth in 2015. The Summer Olympics -- hosted by Brazil -- should help boost growth to 14.2% in 2016, followed by 10.5% growth in 2017.
Australia, New Zealand, Hong Kong, Singapore and South Korea are expected to see only an average growth of 3.4% a year through 2017. And the Middle East and North Africa are forecast to see an average rate of annual growth of 3.1% between 2014 and 2017.
Meanwhile, international advertisers have rapidly reduced their exposure to Russia and the Ukraine due to ongoing strife in the region, while domestic advertisers have been forced to cut their budgets to minimize their losses. As a result, ZO forecasts that ad spend in Ukraine will shrink 62.3% this year, on top of a 51.2% decline in 2014. Meanwhile, ZO expects Russia will shrink by 16.5% in 2015, and Belarus will drop 33.5%.
Despite this pullback, these three markets only account for 2.1% of global ad spend, so their sudden decline has slowed but not derailed global ad-spend growth.
Greece is one bright spot, says ZO's Head of Forecasting Jonathan Barnard. Despite economic and political turmoil, the Greek ad market grew 6% in January and 2% in February. The agency now expects Greece to grow from 1.6% in 2015 to 1.9% in 2017.Globally, ZO's current forecast is above the average annual growth rate for the last 20 years (4.2%), and ahead of the average for the last 10 years (2.8%).