Adspend will exceed pre-pandemic peak by 6% this year
• Digital advertising to take 58% share of market in 2021, up from 48% in 2019
• The average cost of television advertising is up by 5% this year, well ahead of its 1% adspend growth rate
• The US alone will supply 46% of new ad dollars this year
Global advertising expenditure will grow 11.2% in 2021, driven by exceptional demand for performance-led ecommerce advertising and brand advertising on online video, according to Zenith’s latest Advertising Expenditure Forecasts report, published today. Advertising expenditure will total US$669 billion this year, US$40 billion more than was spent before the pandemic in 2019.
Growth in advertising expenditure is expected to remain robust in the medium term, with 6.9% growth forecast for 2022 and 5.6% for 2023.
The coronavirus pandemic has accelerated the structural shift in the economy from bricks-and-mortar sales to ecommerce, driving more consumers than ever to research and complete purchases online. Brands have responded by forming partnerships with retailers and creating new direct-to-consumer operations, using performance-driven advertising – primarily in social media and paid search – to lead consumers down the path to purchase. Zenith forecasts that social media advertising will expand by 25% this year to reach US$137 billion, overtaking paid search in scale for the first time. Paid search will expand by 19% to reach US$135 billion.
Much of this is new money to the ad market, coming from small businesses that have had to pivot rapidly to ecommerce to survive lockdowns, and from budgets that brands would previously have allocated to retailers to secure physical shelf-space, which they are now spending on display and search ads on retailer websites. The shift to ecommerce will slow down as coronavirus restrictions lift and economies open up again, but won’t go into reverse. Zenith expects ecommerce to continue to pull in incremental revenues to the ad market, driving 13% growth in social media and 12% growth in search in 2022.
Audiences continue to migrate online, and online video viewing is growing rapidly, even as traditional television ratings shrink again after a one-off spike when lockdowns began in 2020. Advertisers value online video as a means of maintaining reach while television declines, but it’s an effective form of brand communication in its own right. Demand is strong, although the popularity of subscription-funded video-on-demand has helped limit the supply of high-quality online video available to advertisers. Zenith predicts that online video advertising will be the fastest-growing digital channel in 2021, rising by 26% to reach US$63 billion.
“The online video landscape continues to transform, fuelled by the growth of streaming services and connected TVs,” said Benoit Cacheux, Global Chief Digital Officer at Zenith. “Its continued evolution requires a radical rethink of how to build the optimal screen-neutral reach model. The ingestion of new data sources into TV planning also creates further opportunities to further sync TV and video planning.”
Social media and online video have eclipsed traditional static display, which is forecast to shrink by 15% this year, while online classified grows by just 4%. Overall, Zenith expects digital advertising to grow by 19% in 2021, and increase its share of total adspend to 58%, up from 48% in 2019 and 54% in 2020.
Most other media are enjoying growth this year, as spending rebounds from the 16% drop in traditional media adspend in 2020. Cinema and out-of-home were the worst affected by COVID-related restrictions, shrinking by 72% and 28% respectively, and will enjoy the fastest recovery in 2021, with respective growth rates of 116% and 16%. Radio advertising, which shrank by 22% in 2020, is forecast to grow by 4% in 2021, while television fell 8% in 2020 and is forecast to grow 1% in 2021. Print will continue its long decline, now in its 14th consecutive year, with an 8% drop in adspend in 2021. In 2023 adspend in all these media will still be below 2019 levels, though cinema and out-of-home will have made up almost all of their lost ground.
Limited supply and rising demand are stoking media inflation
This year’s rapid recovery in adspend, coupled with the continued migration of audiences from traditional to digital channels, is fuelling substantial increases in media prices, particularly in television. The cost of television advertising is up 5% this year on average, though the variance between markets and audiences is wide. Television spend is up by 1%, so the volume of audiences reached globally is shrinking. Digital media growth, in contrast, is mainly driven by rising audiences and more extensive monetisation, with online video inflation averaging 7%, and social media roughly flat, compared to their 26% and 25% respective adspend growth rates.
US to add nearly half of all new ad dollars
All regions will enjoy robust adspend growth in 2021, ranging from 9% in Asia Pacific to 15% in the Middle East and North Africa, which is recovering from the steepest decline in 2020, of 21%. The strongest underlying growth since 2019 is taking place in North America, which is forecast to grow by 13% this year despite shrinking by only 1% last year. Growth in North America is being driven by the very rapid pace of digital transformation in its industries, as well as strong investment in connected TV and advertising-funded video-on-demand.
The US will be by far the largest contributor to global growth in 2021, accounting for 46% of the US$67 billion added to the global ad market this year, followed by China with 11%, and Japan and the UK with 6% each.
“After a very tough year last year, the ad market is enjoying rapid and broad-based recovery, and will end this year well above the level it achieved in 2019,” said Jonathan Barnard, Head of Forecasting at Zenith. “Digital advertising is becoming a more effective tool for brand growth as media and commerce continue to move online, attracting greater investment from large brands and small businesses alike.”