GroupM: Ad spending continues to slow; digital giants skew figures

Latest GroupM global media and advertising forecasts report shows deceleration in global advertising growth and the dominance of digital players in the mix

The latest GroupM global media and advertising forecasts show continued deceleration in advertising growth in 2020 off the back of slowdown this year.

The latest Global Ad Forecast report predicts advertising growth for 2019 will reach a revised 4.8 per cent, down from 5.7 per cent in 2018, and forecasts 2020 increases of just 3.9 per cent and 2021 figures of 3.1 per cent. This compares to GDP across the 37 countries represented in the report of 2.6 per cent this year and a projected 2.5 per cent in 2020.

GroupM’s figures echo similar predictions made in Zenith’s 2020 advertising expenditure forecasts, also released last week.

According to GroupM global president of business intelligence and report author, Brian Wieser, a huge portion of growth is coming from dominant digital-first brands such as Alibaba, Alphabet (Google), Booking.com, eBay, Facebook, Netflix and Uber. Combined, these companies account for at least $36 billion in spending, and are $1 billion+ advertisers, skewing figures substantially.

“Adding a couple of dozen companies from the next tier of comparable marketers would easily add tens of billions of dollars of additional activity,” the report stated. “Combined, this small group of companies accounts for a majority of the world’s growth in advertising spending.

“To the extent that these companies tend to take shares of consumer spending from others and do not directly cause the global economy to expand, at some point their growth converges with global averages, resulting in slowing growth spending as well.”  

In addition, the US and UK are raising global advertising averages, GroupM said. In the report, US spending accounted for nearly 40 per cent of total advertising expenditure, or $246 billion, while the UK market was up 44 per cent in the last six years. China has also become the clear number two market for advertising, with 16 per cent of total media-owner ad revenue highlighted in the GroupM report.

What’s more, the median growth rate shows sharper deceleration, an indication growth is being driven by a small number of large countries and smaller countries are experiencing worse growth than the report’s headline figures, bringing down the worldwide average, Wieser commented.

Australia was highlighted as a $10 billion + ad market alongside Canada, yet the report made clear softening economic conditions and a real risk of recession locally will see the two markets differ in the next couple of years.

“The Australian ad market was likely only stable in 2019 versus 2018 and probably grows only slightly in 2020, for a +2 per cent gain expected next year,” the report stated. In contrast, Canada is expected to grow by 5 per cent in 2019 and upwards of 3 per cent in subsequent years.

While there’s clear softening of the advertising overall, GroupM’s report noted 3-4 per cent growth rates between now and 2024 are similar to the pace of growth seen in 2012-2014.

“We estimate the total global advertising market during 2020 will amount to $628 billion as we define advertising here, but would likely approached $700 billion on a broader definition that includes spending on direct mail and directories around the world,” the report stated.

Channel figures

GroupM also looked into the ups and downs of advertising by channel. Across the board, 52 per cent of global advertising tracked was in digital advertising, and 60 per cent of total advertising in markets including China, the UK, Sweden and Denmark is all now in digital channels. Google and Facebook generated approximately $175bn of total revenue on a net basis. Internet-related advertising is expected to account for $326 billion in ad revenue in 2020, up from $294 billion in 2019.

Another bright channel spot was out-of-home media. Although growth between 2018 and 2019 has slowed from 5.3 per cent to 1.8 per cent, GroupM projected 2.5 per cent growth in 2020 and 3-4 per cent growth rates up to 2024.

By contrast, TV ad revenue in 2019 declined by 3.6 per cent. While digital extensions associated with TV have helped somewhat, it’s not enough to see TV growing in the future, the report stated, predicting just under $170 billion in annual ad revenue each year through to 2024. Today, TV commonly accounts for about 40 per cent of a typical marketer’s media budget, GroupM added, or 27 per cent on average across all advertisers represented by the report.

GroupM’s report aims to forecast advertising growth across 37 territories and countries.

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