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ZenithOptimedia predicts global ad expenditure will grow 4.1% in 2013, reaching US$518 billion by the end of the year. As has been the case since the economic downturn began in 2007, this growth will be led by developing markets, which we forecast to grow by 8% on average in 2013, while developed markets grow by just 2%, weighed down by the eurozone crisis.
Internet advertising is supplying most of the growth in expenditure by medium, driven by rapid development in social media and online video. We forecast internet advertising to grow by 14.6% in 2013, while traditional media grow by 1.7%.
The advertising market has been slow to recover from its 9.6% decline in 2009, the sharpest decline ZenithOptimedia have on record. This is mainly because the underlying economic recovery has been slow and erratic, as is normally the case when recessions are caused by financial crisis.
The eurozone crisis in particular is dragging down economic growth at the moment. This is because the eurozone is in recession, its imports from other countries are slowing down or shrinking, and the risk of eurozone collapse adds to global uncertainty, leading companies to hoard cash instead of investing in growth.
Developing markets slowed in mid-2012, partly thanks to weak exports to the eurozone, but recent economic data suggests that government stimulus has helped prevent a prolonged slump.
The main risks to growth in 2013 are the US fiscal cliff (automatic increases in tax and reductions in public spending that come into effect in January) and the potential for further conflict in the Middle East (and therefore higher oil prices). The general consensus among economic forecasters, however, is that the global economy will gradually build up speed over the next three years. The IMF predicts nominal GDP growth will rise from 5.6% in 2012 to 6.9% in 2015 (in the countries included in our forecasts, converted into US dollars at average market exchange rates for 2011).
ZenithOptimedia predicts ad expenditure will rise in step with GDP over the next three years, although ad expenditure growth will remain behind GDP growth throughout our forecast period. We do not expect ad expenditure to grow at or ahead of GDP until full confidence in the global economy is restored. In particular this will require a convincing, permanent solution to the eurozone crisis.
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Ad expenditure in North America is much more robust than in Europe. Consumer confidence, retail sales, job numbers and house construction are all trending encouragingly upwards. We expect 4.1% growth this year, boosted by unexpectedly strong ratings for the Olympics and record political spending in the US. In the absence of these quadrennial effects we expect growth to slip back to a still-respectable 3.5% in 2013, followed by 4%-5% annual growth in 2014 and 2015.
Latin America is another region with rapidly growing economic output like Eastern Europe & Central Asia and Catch-up Asia, and its ad market is growing at a similar rate. Latin America’s growth rate will be slightly disappointing at 7.8% in 2012, partly because of a row over how TV advertising is monitored and sold in Mexico, but it should return to 9%-10% growth a year in 2013 to 2015.
Despite the rapid growth of the developing markets, the US is still the biggest contributor of new ad dollars to the global market. Between 2012 and 2015 we expect the US to contribute 28% of the US$76 billion that will be added to global adspend. However, seven of the ten largest contributors will be developing markets, contributing a further 44% of new adspend. Overall, we predict developing markets will contribute 61% of adspend growth between 2012 and 2015, and increase their share of global adspend from 34% to 37%.
We forecast six of the current top-ten ad markets will retain their positions in 2015: the USA, Japan, China and Germany in first to fourth place, Australia at eighth and South Korea at tenth. Three markets will fall down the rankings: the UK from fifth to sixth, and France from seventh to ninth, while Canada will fall out of the top ten altogether. Meanwhile Brazil will overtake the UK to take fifth place, while Russia will rise from eleventh place in 2012 to seventh in 2015.
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