Low to mid-single-digit increases in ad spend is the consensus for next year from a trio of new advertising forecasts released Monday. Magna, GroupM and Zenith each call for continued growth in 2019, even after a robust marketplace in 2018 that saw a record $4 billion in political ad spending from the midterm elections.
Recapping the three forecasts:
Magna Global
Magna Global upped its outlook for 2019 ad spending to 4.7% growth from an earlier prediction of 4%. The ad-buying group, which is which is part of Interpublic, also raised its global growth forecast for this year, calling for spending to increase 7.2% to $552 billion from an earlier projection of 6.4%.
Smaller and newer advertisers, coupled with ongoing growth in digital advertising, are contributing to what Magna calls a “significant upswing” in ad spending. The company says global advertising is nearing its strongest showing since 2010, when the ad market recovered after two years of recession, and the second strongest since 2004, thanks to a combination of strong demand and cyclical drivers. Growth in digital advertising drove a huge portion of the increases this year. Digital ad spending will grow by 17% in 2018 to $251 billion, Magna says, lifting that forecast by 1.5%.
Smaller advertisers are also fueling growth on digital platforms such as Google and Facebook, says Vincent Létang, executive VP of global market intelligence at Magna. Big national brands only account for around 20% to 25% of total spending on the platforms, he said.
Ad spending in the U.S. is on track to rise 7.5% in 2018 to reach an all-time high of $208 billion. This year’s record-shattering $4 billion 2018 midterm election ad spending was up 43% from 2014 and included $3.1 billion for local television, $460 million for direct mail, $150 million for radio and $20 million for outdoor.
Digital ad sales grew by 16.6% this year to pass the $100 billion milestone (52% of total ad sales) while non-digital ad sales stabilized thanks to cyclical drivers (-0.7%).
Magna predicts a “moderate slowdown” in U.S. ad growth to 2.4% in 2019, but that’s still an increase from the company’s previous expectations of 2%. After stripping out spending from cyclical events such as the Olympics, U.S. ad spending will rise 4.5% next year, close to the average over the last eight years, Magna said.
“Global Advertising Spending expanded by the strongest growth rate since 2010 this year,” Létang says. “This record growth was fueled by the combination of a robust economic environment prompting most verticals to increase ad spend, as well as stronger-than-expected cyclical spend.”
A deceleration is expected in 2020, when digital media “reaches maturity” and the U.S. economy is likely to slow, according to Létang, citing macroeconomists. There also is growing concern that ad revenue could be hampered next year by cutbacks in the auto industry and uncertainties in the economy.
Group M
GroupM, part of agency holding company WPP, now predicts global ad-spending growth of 3.6% for 2019, down from its earlier prediction of 3.9%, with total new investment expected to reach $19 billion instead of the $23 billion earlier predicted. The ad buying group also slightly downgraded 2018 growth expectations from 4.5% to 4.3%.
“GroupM’s still strong but slightly fraying 2018 view ties to macro questions: tighter money, China’s slowing growth, and the potential for pricey trade wars,” said Adam Smith, futures director at GroupM, in the forecast. “Real interest rates are edging up globally, but serious potential problems remain limited to a fragile five—Argentina, South Africa, Brazil, Turkey and Venezuela.”
GroupM forecasts that ten countries will provide 83% of all 2019 growth. China remains the largest contributor with the U.S. ranked second. The U.S. has lower unemployment and improved consumer confidence in its favor but increasing energy prices, rising interest rates, and low unemployment have stoked concerns about the possibility of increased inflation. Marketers continue to scrutinize digital investments with emphasis on verification and value, GroupM says.
Zenith
Zenith hasn’t changed its 2018 forecast, repeating its prediction that global ad expenditure will grow 4.5% to $581 billion in 2018. Despite the lack of big cyclical ad drivers in 2019, Zenith is calling for 4.0% growth for 2019, followed by 4.2% in 2020 and 4.1% in 2021. While its 2019 forecast is down slightly from a September prediction of 4.2% growth, the 2020 Zenith forecast is stable and the 2021 forecast is new.
Honing in on North America, Zenith expects adspend to grow 3.0% in 2019, and to average 3.4% growth each year to 2021. “North America’s ad market has been growing fairly steadily but unspectacularly since 2010,” Zenith says in the new report, citing strong economic growth and low unemployment. “The U.S. will be the leading contributor of new ad dollars to the global market over the next three years, making up in scale what it lacks in speed,” Zenith says.
Online advertising overtook traditional TV advertising to become the world’s biggest ad medium, accounting for 38% of total ad expenditure, Zenith says. “As internet advertising matures, its growth is slowing down, but it remains the fastest growing medium by some distance and it is still gaining share rapidly,” the forecast says. It predicts internet adspend grew 12% in 2018, and anticipates an average growth rate of 9% a year from 2018-2021. By 2021 Zenith says internet advertising will account for 47% of global adspend.