This Year, Next Year: Global Mid-Year Forecast Report

Brian Wieser

Five key takeaways

The June 2020 Global mid-year forecast shows declines in consumer and advertising spend across the board. COVID sharply transformed the global advertising economy from a 6.2% growth rate in 2019 to a decline of 11.9%, excluding the effects of increased U.S. political advertising. This decline returns the industry to slightly higher than 2017 levels in constant currency terms.

2020’s decline can still be considered “modest” given the scale of the impact of the pandemic on global GDP, which will fall much more significantly than it did in the 2009 global financial crisis. In that year, when GDP declined by 1%, we estimate that global advertising fell by 11.2%. Including U.S. political advertising, we estimate global advertising will decline by 9.9% in 2020.

We do see positive news on the horizon as we expect global advertising to grow by 8.2% next year on an ex-U.S. political basis, or by 5.9% including it. Looking at larger markets, we expect a 0.9% decline in the U.S., including political advertising, and growth of 9.2% for China next year. Among the top 10 markets, most expect to see double-digit growth including Japan (15%), the U.K. (12.6%), Germany (10.6%), Brazil (15.0%) and Australia (25.2%). Meanwhile, Canada and South Korea anticipate low single digit gains while France anticipates high single digit growth during 2021.

In this version of This Year, Next Year we are introducing estimates of “digital extensions,” which refers to digital advertising associated with traditional media. These figures are broken out to show the degree to which traditional and digital advertising overlap within individual media types and provide a baseline around which digital trading concepts may be applied to traditional media and to ensure an absence of duplication with “pure-play” internet-based digital media owners.

On average, during 2020, digital extensions of TV, radio, print and outdoor advertising should equate to $31 billion, or 13% of total advertising activity (up from $22 billion, or 7%, five years ago). Digital extensions are most pronounced in the outdoor sector, where they account for $9 billion this year, or 31% of the total outdoor sector’s activities. Digital extensions of traditional television equate to $12 billion this year, 9% of that medium’s total.

We expect digital extensions to continue taking share of traditional advertising but at a slower pace – equating to 16% of advertising spending on traditional media by 2024.

Understanding that context, here are the five key takeaways from This Year, Next Year: Global Mid-Year Forecast Report:

  1. Digital advertising, narrowly defined to exclude traditional media extensions, is expected to decline by 2.3% during 2020. This follows nearly a decade of double-digit growth, with many years exceeding 20% at a global level. Growth should resume in 2021, although at a more modest pace than in the past decade as many of the drivers supporting digital advertising’s expansion should generally decelerate. During 2020, digital advertising will have a 52% share of media captured here, up from 48% in 2019 and 44% in 2018. Share growth should abate somewhat going forward, adding 1-2% each year. Our new estimates also break out search from non-search digital advertising. We estimate that search advertising will account $109 billion in revenue during 2020, falling 2.6%. Other forms of digital advertising that account for $172 billion (excluding digital extensions of traditional media) will fall by less, or 0.6% this year. Following a double digit rebound next year, growth rates for both types of digital media should then grow by high single digits through our model’s 2024-time horizon.
  2. Television advertising should retain its dominant role for large brands but will nonetheless decline severely this year. Excluding political advertising in the U.S., we anticipate total television advertising declining by 17.6% in 2020 before rebounding slightly to grow 5.9% next year. Digital extensions and related media, including advertising associated with traditional media owners’ streaming activities, as well as Hulu, Roku, etc., will fare much better, with growth of +3.7% this year and +11.3% next year. We estimate those digital extensions will amount to around 9% of total TV spending this year. Television’s share of advertising, if we define TV including its digital extensions, is expected to be 27% during 2020, down from approximately 37% at this point 10 years ago.
  3. Outdoor advertising and related out-of-home media, such as cinema, accounted for $40 billion in activity during 2019, or 7% of all advertising we track. Of this figure, $12 billion was in a digital format. With restrictions on social activity, this medium was always set to be disproportionately impacted by the crisis, as the value proposition to marketers looking to reach consumers away from home partially evaporated for a period of time. Overall, we estimate declines of 25.0% including digital out-of-home media. Next year should see a partial rebound with 14.9% growth. Beyond 2021, we expect outdoor advertising to grow by low or mid-single digits and generally lose share of total advertising, although we do expect larger brands to generally increase their allocations of budgets to the medium.
  4. Print media, including newspapers and magazines, are expected to account for around $49 billion in advertising this year if we include digital budgets associated with print properties, or $40 billion excluding them. Declines in 2020 are likely to amount to 25% as prior high-single digit declines accelerate. This trend should generally resume when an economic recovery occurs. Print publications in most markets are likely to go through a vicious cycle of disinvestment in content due to an absence of advertiser support that will then lead to disengaged consumers and advertisers who are, in turn, further disengaged themselves. There will be exceptions to this trend, especially where publishers invest more aggressively in their content offerings for consumers and their marketing solutions for advertisers.
  5. Audio media is likely to also decline by 23% during 2020, as advertisers disinvest in part because of its association with away-from-home activities such as driving. The medium’s total ad revenue will equal $25 billion. However, we note that audio’s value to marketers – often under-appreciated – likely holds up, as relatively high levels of listenership and reach continue to help make the medium relatively effective. Digital extensions of the medium, including streaming services from terrestrial stations and their digitally oriented competitors and podcasts, remain relatively small in the low single digit billions, but help make the broader medium more appealing to marketers.

 

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