CHINA

Global AD Spend to Hit $563.6 Billion in 2017 with Digital Driving Growth

23 Jun 2017

  • New ad spend forecasts show caution in 2017 but improved outlook for 2018
  • Globally, digital is forecast to overtake television and mobile to overtake desktop
  • Innovation in digital advertising (video, social, programmatic) powers growth

 

Global ad spend holds at 3.8% amid cautious near-term outlook

Based on data received from 59 markets across the Americas, Asia Pacific and EMEA, Dentsu Aegis Network’s Ad Spend Report – June 2017 points to a more cautious economic outlook in 2017 than the previous year, with global ad spend falling from 4.8% to 3.8% (see Figure 1). However, conditions are set to improve in 2018 with forecast growth of 4.3%. Events will play a key role in bolstering ad spend growth in 2018, with events such as the Winter Olympics & Paralympics in South Korea, the FIFA World Cup in Russia and the US Congressional elections all expected to stimulate growth.

 

Despite concerns about the economic impact of Britain’s decision to leave the European Union, UK ad spend held up better than expected in 2016 at 6.1%. While there are signs of caution in 2017, with growth dipping to 4%, 2018 is forecast to see growth bounce back to 5.9%. A similar picture unfolds in the United States, where a slowdown to 3.6% is forecast for 2017, followed by a slight improvement in 2018 to 4.0%. The United States also remains the largest market in the world, accounting for 37.7% of global advertising spend. Advertising spend in emerging markets continues to outpace developed economies. For example, ad spend in India is forecast to grow at 13% in 2017, while China is the second largest market in the world by share of advertising spend—remaining the only emerging economy to feature in the top five largest ad markets.

 

Mobile and digital become the new default settings

Our forecasts show how digital technology continues to disrupt and drive innovation in the way brands connect with their consumers. In 2017, we forecast that advertising spend on mobile will overtake desktop in terms of share of global advertising spend, reaching 56% and accounting for a total of US$116.1 billion. With smartphone subscriptions set to reach 4 billion by 2025 and about a third of consumers reporting that their smartphone is their primary source of entertainment, we can expect to see this trend continue to strengthen.

Furthermore, in 2018, our forecasts suggest that digital will be the top media in terms of global share of spend, taking over television for the first time. Digital’s share of total media spend is predicted to reach 37.6% share in 2018, versus 35.9% for television, amounting to US$215.8 billion. Reflecting the continued disruption by digital technology of the print media industry, Paid Search (advertising within the sponsored listings of a search engine) is forecast to overtake traditional print media (newspapers and magazines) in 2018. Print media has been on a downward trajectory for some years now, but will fall to 13.8% share of total spend in 2018 while paid search grows to 14.6%.

 

Video, social and programmatic power innovation and growth

While digital ad spend is growing rapidly and set to overtake television, within digital there are a number of new sources of growth that point to the future of advertising. For example, in 2017, online video is set to grow by 32.4%; social by 28.9%; and programmatic (i.e. automated ad buying) by 25.4%. Looking ahead, brands will need to embrace the potential of disruptive technologies such as virtual reality, artificial intelligence and voice activation. However, research suggests that only 8%of brands currently intend to use virtual reality for advertising purposes.

Ad spend in the Asia-Pacific region exceeds global average

Advertising expenditure in the Asia-Pacific region is forecast toexceed the global average growth, reaching 4.3% in 2017 and 4.6% in 2018. Advertising expenditure in China is forecast to increase by6.0% in 2017, and by 5.4% in 2018 to reach US$88.2 billion.China is the number one ad market in Asia Pacific makingup a dominant 43.6% share of total advertising spend inthe region in 2017, forecast to increase to 44.0% in 2018.Growth is being driven by categories suchas Pharmaceuticals, Telecommunications and the FMCGcategory – Beverages, Food and Household. Digital media spend is predicted to reachUS$45.4 billion in 2017 and account for more thanhalf (54.3%) of total spend, rising to 59.6% in 2018.This growth is being fuelled by Mobile spend, which isexpected to increase by 36.6% in 2017 and 25.8% in 2018.

Commenting on the latest ad spend forecasts, Jerry Buhlmann, CEO of Dentsu Aegis Network, said:

“We are reaching a tipping point in ad spend now as digital overtakes television, mobile overtakes desktop and paid search overtakes print. Digital and data must now be the default settings for advertisers. Evolving to people-based marketing rather than audience-based marketing and using data to increase addressability is essential for brands to manage tighter conditions in 2017 while positioning themselves for future growth.”

“At the same time, the challenge for brands is to ensure that they are ready to embrace the potential of new innovation. As technologies such as virtual reality and voice activation become more prominent, brands must ensure that they remain relevant by creating new value for their consumers.”

“China is the second largest advertising market in the worldbehind the United States. The market is at the forefront of digital disruption with the entry of new internet service providers and fierce competition among mobile phone manufacturers. In China, online shopping, live broadcast and VR, as well as myriad apps of taxi service, wealth management and life service are all the emerging ways of life. In this increasingly complex environment, our opportunities lie in whether we can help clients create the most effective interaction and communication with their digital savvy consumers,” added Motohiro Yamagishi, CEO of Dentsu Aegis Network China.

 

Figure 1: Growth in advertising expenditure 2016-2018 (selected economies)

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*Digital: ‘Digital Advertising’ or ‘Digital Media’ or ‘Digital’ includes advertising spend from Search, Display, Online Video, Social Media and Mobile.

*TV: ‘TV’ or ‘Television’ includes advertising spend from local and national linear Television.

*Print: ‘Print’ is defined as the combined advertising spend of Magazines and Newspapers.