by Larissa Faw , Steve McClellan (@mp_mcclellan)
Expect some moderate growth in advertising in 2018. That growth will be boosted in part by big events like the Olympics and midterm political elections.
Publicis Groupe’s Zenith is forecasting 4.1% global ad growth in 2018 to $578 billion, a bit lower than the agency’s projected growth of 4.4% for full-year 2017. For the U.S., Zenith is projecting 3% to $204 billion in 2018.
For the first time, Zenith has demonstrated the return on investment for internet ad spend, and not just its scale, according to the Publicis Groupe agency’s latest Advertising Expenditure Forecasts. Advertisers spent 27% of their budgets on internet advertising in 2014, which produced only 21% of brand experience. By 2015, brands were using internet advertising more effectively: accounting for 30% of both budgets and paid brand experience.
Last year was the first time internet advertising started working harder than advertising in other media, when brand experience exceeded budget share. In 2016 internet advertising accounted for 34% of global ad budgets but produced 35% of brand experience.
Zenith describes brand experience as a combination of two factors: reach – how likely consumers are to encounter brand messages at each touchpoint – and influence -how likely each message is to consumer attitudes or behavior. It covers all touchpoints across paid, owned and earned media, but because the report compares it to advertising expenditure, Zenith only measures the brand experience of paid media.
Zenith estimates the value from Internet advertising will rise from $203 billion in 2017 to $225 billion in 2020. The share of advertising expenditure allocated to internet advertising will also continue to grow, reaching 40% in 2018 and 44% in 2020.
Globally, the 10 biggest-contributing cities will increase by a total of $7.5 billion between 2016 and 2019, representing 11% of growth over these years. These ten cities will be in descending order: New York (where ad spend will grow by $1.4 billion), Tokyo, Jakarta, Los Angeles, Shanghai, Houston, Dallas, Beijing, London and Chicago (which will grow by $0.6 billion).
The concentration of growth in two countries cannot be underestimated. Collectively, the U.S. and China will contribute 47% of new ad dollars from 2017 to 2020, and half of the top 10 cities for growth through 2019 are U.S.-based, including NY, LA, Houston, Dallas, and Chicago.
“The strength in the U.S. is indicative how this market increasingly pioneers the development of new technologies, tools and technique that serve as market differentiators in the U.S. and an incubator for the rest of the world,” says Sean Reardon, CEO, Zenith U.S., Moxie and MRY.
Most of this spend, perhaps unsurprisingly, will be captured by just five big platforms both based in the U.S. and China – Google and Facebook, as well as Baidu, Alibaba and Tencent. Between them, these five platforms increased their share of global internet ad spend from 61% in 2014 to 72% in 2016, and captured 83% of the growth in internet ad spend during the same time frame.
The rise of the internet has had huge consequences for the other media, though brands are seemingly returning to classic options. The decline of print has been a fact of life for years, so I was quite surprised to see that it is now slowing noticeably, says Jonathan Barnard, head of forecasting, Zenith. “Brands should not blindly increase their internet ad budgets without ensuring that they are concentrating on the right digital channels, he says, which will vary by category and by brand. “They should consider that ‘traditional’ media may be more effective for specific purposes.”
Still, uncertainty about the future may be the most pressing problem cited by Zenith clients. They are feeling pressure from the growth of online media and the power wielded by the “big platforms, big countries and big cities,” reports Zenith.
At the end of November, agency’s clients reported an average response of 57 points in terms of expected brand growth in 2018, down from 67 year-over-year. (0 means everyone expects decline in 2018 and 100 means everyone expects growth.) Food and drink brands have been the least affected, with a score of 66 this year, down just a point from 67 last year. Packaged goods, retail and telecom brands, on the other hand, have all fallen to 50, expecting no growth, down from positive scores last year.
This article was originally published on MediaPost. Read more.
