However, 2016 was a ‘quadrennial year’, and benefited from extra adspend stimulated by the US elections, Summer Olympics in Rio and the football championships in Europe, making the annual comparisons tougher for 2017. These events added about US$6bn to the global total in 2016; after adjusting for this, underlying growth will actually strengthen from 3.6 per cent in 2016 to 5.4 per cent in 2017.
This growth is coming from acceleration in Latin America and Central and Eastern Europe, and continued strong expansion in Asia Pacific.
Conditions in Latin America are improving: Brazil has emerged from its longest recession since the 1930s, while Argentina is finally tackling inflation as its economy starts to recover too. Central and Eastern Europe is gathering speed after conflict and sanctions hit Russia and connected markets in 2015. Zenith forecasts 4.1 per cent growth in adspend in Latin America this year, up from a 0.2 per cent decline last year, and 7.3 per cent growth in Central and Eastern Europe, up from 4.1 per cent growth last year.
Advertising expenditure in Asia Pacific will grow by US$30bn between 2016 and 2019, contributing 43 per cent of the global growth in adspend over this period, Asia Pacific will contribute nearly 50 per cent more ad dollars than the next region, North America, which will grow by US$20bn (29 per cent of global growth).
Western Europe will grow by US$8bn (11 per cent), Central and Eastern Europe will grow by US$4bn (6 per cent), and Latin America will grow by US$3bn (4 per cent).
By 2019 Asia Pacific will account for 33.4 per cent of global adspend, up from 32.1 per cent in 2016. This will be the first time it will account for more than a third of the global total. The Asia Pacific ad market will still be smaller than the ad market in North America, which will account for 36.3 per cent of global adspend in 2019, but the gap between the two is narrowing.
In 2013 the North American ad market was US$35bn larger than Asia Pacific’s, but by 2016 the difference had dropped to US$27bn, and Zenith expects it to fall to US$18bn in 2019.
The UK was the stand-out growth market in Western Europe from 2011 to 2016, growing at an average of 7.3 per cent a year while the rest of the region grew by just 0.4 per cent a year. However, a slowing economy, gathering inflation, and political uncertainty over the mid-year elections and upcoming Brexit negotiations have all contributed to a sharp drop in adspend growth in the UK in 2017. Zenith now forecasts just 0.9 per cent growth in UK adspend this year, compared to 2.4 per cent growth for the rest of Western Europe, and down from 9.6 per cent growth in UK adspend in 2016.
This drop in UK growth, together with the quadrennial comparison, will drag growth in Western European adspend down from 4.6 per cent in 2016 to 2.0 per cent in 2017.
In the run-up to the Cannes festival, Zenith conducted an exclusive survey about brand growth among their key clients. As part of this survey Zenith asked advertisers around the world how confident they were in the prospects for growth in their category this year. Zenith then ranked each category on a scale from 0 to 100, where 0 means everyone expects substantialdecline, 100 means everyone expects substantial growth, and 50 means the averageexpectation is for no growth.
The results were as follows: media and entertainment advertisers came out on top, with a score of 82.1, followed by pharma/healthcare and alcohol. The lowest-scoring category was telecommunications, at 33.3, followed food & drink and FMCG (excluding food).
Ranking of categories by advertiser confidence in growth
Survey of 158 key Zenith clients around the world
(Category and Confidence index)
1. Media and entertainment 82.1
2. Pharma/healthcare 70.3
3. Alcohol 70.0
4. Luxury 67.6
5. Beauty 67.2
6. Automotive/vehicles 63.6
7. Travel 61.4
8. Retail 60.0
9. FMCG (non-food) 55.7
10. Financial/insurance 53.6
11. Food & drink 48.4
12. Telecommunications 33.3
“Latin America and Central and Eastern Europe are improving, but Asia Pacific remains the main engine of global adspend growth,” said Jonathan Barnard, head of forecasting and director of global intelligence at Zenith. “China may be slowing, but it’s still growing at US$5bn a year, while India, Indonesia and the Philippines grow at double-digit rates.”
“Global advertising budgets are rising steadily but cautiously, and are falling slightly behind overall economic growth,” said Vittorio Bonori, Zenith’s global brand president. “After a decade of cost-cutting since the financial crisis, we believe brands now need to focus on topline growth. Our survey shows that brands are looking to data and technology as the main driver of business growth, closely followed by business transformation and new competitive positioning.”
Download Zenith's Advertising Expenditure Forecasts executive summary here.
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