Digital Advertising Acceleration Slows But Remains Strong; ‘New World’ Traditional Media Investment Decreases for the First Time
LONDON AND NEW YORK, December 7, 2015 – WPP’s GroupM, the world’s leading media investment management group responsible for nearly one-third of global advertising investment, today issued its bi-annual global advertising expenditure forecast which predicts ad investment growth of 3.4 percent ($17bn incremental) in 2015 and 4.5 percent in 2016 ($22bn incremental). These are slight downgrades from GroupM’s predictions at midyear for 2015 and 2016 which were 4.0 percent and 4.8 percent respectively.
The forecast is published in GroupM’s biannual worldwide media and marketing forecast report, This Year, Next Year, available at www.groupmpublications.com. The intelligence is drawn from data supplied by WPP’s worldwide resources in advertising, public relations, market research and specialist communications by GroupM’s Futures Director, Adam Smith, who commented, “The outlook remains tough. Marketers’ constrained pricing power in a deflationary world, a macro trend, prompts ongoing focus on cost control versus investment and this colors our outlook. Continued strength across the majority of the BRIC and Next 11 countries, notably mainland China, is a highlight of the forecast, but the Eurozone is still struggling to find traction. While our outlook is overall positive, we recognize the downside risks of financial pressures in faster growth markets and the changing profile of China’s external demand.”
Brazil, Russia China and India, GroupM believes will represent 23 percent of measured global ad investment in 2016, a proportion which has grown every year since they began measuring it in 2000, and GroupM continues adding a point a year for the BRICs in its modelled forecast through to 2020.
Mainland China remains the largest contributor to global advertising growth, but GroupM has revised downward its 2015 forecast from 8.7 percent to 7.8 percent, and the 2016 forecast is also slightly reduced from 9.6 percent to 9.1 percent. GroupM observes that Chinese consumer demand remains strong, supported by wage growth, urbanization, property wealth and supportive governmental policy. However, on the external side, less demand for primary resources, less foreign direct investment (FDI), less local tourism, and the impact of domestic goods and services replacing imports are among the top reasons for ad market slowdowns in Taiwan and Hong Kong.
Elsewhere among the BRICS, GroupM predicts that India will be the fastest-growing economy in 2016, and the 2016 forecast is raised by two points to 15 percent. India is a beneficiary of cheaper oil, as is its Next 11 neighbor Pakistan, which GroupM also upgraded in the forecast. Russia is at risk of another step down in the oil price, but absent another shock, a soft Ruble and room to ease rates could assist quick recovery. GroupM expects a short, sharp ad recession of 13 percent in 2015 followed by 2 percent growth in 2016. And despite the Olympic summer, GroupM revises Brazil’s 2016 down from 9 percent to 7 percent. There, household spending continues to shrink as unemployment potentially reaches a ten-year high.
The Eurozone now accounts for only 11 percent of global advertising, and Eurozone consumer price inflation remains near-zero; monetary policy is set to ease just as that of the USA may tighten. Zero ad growth is forecast in France in 2016, and German and Italian annual ad growth for 2016 is anticipated to fall only between 1 and 2 percent. Spain shows the Eurozone’s strongest recovery, but advertising investment in Spain will still be 55 percent smaller in real terms relative to its 2007 peak. In Europe, outside the Eurozone, high employment and other very positive trends make the United Kingdom the fastest-growing mature ad market in the world and the number three contributor to global ad growth in 2016 behind China and the U.S.
In terms of investments across media types, the shift of advertiser investment to digital, of course, remains the biggest trend. GroupM maintains its midyear forecast and anticipates digital growth of 14 percent in 2016, commanding 31 percent of global ad budgets. This is a deceleration from the 17 percent growth predicted for 2015. The slower but ongoing strength of digital springs from many sources including organic take-up, technical innovation, advances in value, viewability and validation, automation and efficiency, better creative work, and the mastery of data.
“Facebook is addressable and targeted at scale with requisite tools and automation that make it easy for advertisers to understand and use; so it is reaping advertising growth of 50 percent globally, including Instagram. Organic Google website revenue is growing remarkably fast too at 25.5 percent, and they have streamlined YouTube into a complement to broadcaster VOD, even if it is not yet a real challenger on price or quality,” said Dominic Proctor, Global President, GroupM. “We see that digital’s data and automation capabilities are inspiring the evolution of all media -- in all markets across the globe -- but digital will continue its powerful growth and market share gains. This is despite the challenges in the digital space such as viewability, fraud, measurement and currency, all of which we expect to be solved by market forces.”
GroupM believes 2015 will be the first year that absolute spend in traditional media went backwards in the 'new world' (Latin America, Central & Eastern Europe, and Southeast Asia). Only a half-point fall is predicted, but this marks rapid deceleration from the 17 percent growth recorded as recently as 2010. New world newspaper advertising first went negative for growth in 2012, followed by magazines in 2013. China's advertiser exodus from TV to digital gave the extra push required to make 2015 a negative for traditional media in the new world. These trends are anticipated to ease slightly in 2016.
Globally, print media's share of advertising will stand at 18 percent in 2016, according to GroupM. Print’s long-standing run-rate of annual loss is slowing from two points of share to one, but GroupM notes it is too soon to call it a stabilization. The medium is embracing digital distribution, but only the strongest franchises are replicating their eminence in the digital domain. Common obstacles include fragmentation, chronic loss of reach, and lack of common standards in audience measurement and trading.
Traditional TV continues to stand up well. TV accounted for nearly 44 percent of global ad investment at its peak in 2012; since then it has shed about a point a year. China is responsible for most of this loss because TV advertising became more rationed and regulated while the digital ecosystem grew by leaps and bounds. The USA by contrast is perhaps the least-regulated and most competitive TV ad market, and its TV ad revenue share loss is less than the global average. It would look even healthier if its digital gains were properly consolidated with its traditional linear top line.
“TV’s share is rising in almost as many countries as it is falling and contributors to the forecast identified three themes of untapped potential: relaxing regulation, improving the quantity and quality of VOD ad inventory, and format innovation. But every medium is in the midst of transformation; some to accelerate growth, others to decelerate share losses; and GroupM, as ever, plays a central role with the voice of the advertising customer to help shape the market to the advantage of our clients,” added Proctor.
GroupM is the leading global media investment management company serving as the parent to WPP media agencies including Mindshare, MEC, MediaCom, and Maxus, each global operations in their own right with leading market positions. GroupM’s primary purpose is to maximize performance of WPP’s media agencies by operating as leader and collaborator in trading, content creation, sports, digital, finance, proprietary tool development and other business-critical capabilities. GroupM’s focus is to deliver unrivaled marketplace advantage to its clients, stakeholders and people.
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Note to editors: A copy of GroupM’s forecast is available by request to contacts below.
Adam Smith, Futures Director
+44 (0)20 7969 4083
David Grabert, Director, Global Communications