There are a couple small silver linings for established media such as print and TV in the latest ad spending forecast from Zenith (owned by the French ad and marketing giant, Publicis).
The forecast, one of four Zenith issues each year, says a rebound in the US will see ad spending globally rise faster than previously expected this year and next.
Zenith said in its third forecast for 2016, released overnight, that global ad spending will grow by a better-than-expected 4.4%, up from the 4.1% predicted in June. And Zenith also lifted its forecasts for 2017 and 2018, to 4.5% and 4.6% respectively, from earlier forecasts of 4.3% and 4.4%.
“This upgrade is mainly the result of stronger-than-expected growth in the U.S., where a strong labor market has encouraged consumers to increase their expenditure, and advertisers have fought harder for their share of the expanding market,” Zenith said. Australia is included in a group called ‘Advanced Asia’ in the Zenith study which excludes Japan and China.
It said ad spending in the five countries in this group rose 5.3% in 2015, but will slow to a rise of 2.3% a year for 2016 through 2018. That forecast was unchanged from the June outlook.
Zenith said Australia will retain its Top 10 position globally over the next three years, with country remaining in 8th spot.
In 2015, Zenith said Australian ad spending was estimated at $US10.634 billion – that will rise $US894 million, or 8.4% to $US11.528 billion in 2018. And like so many other markets around the world, that pace will be due to the rapid surge in ad spending on mobile and social media, not conventional or legacy media, such as TV, newspapers and magazines.
And it is mobile ads (smartphones really) that are eating everyone else’s lunch, as Zenith explains.
“We estimate global expenditure on mobile advertising at US$53 billion in 2015, representing 34.8% of internet expenditure and 10.4% of total advertising expenditure (this total excludes a few markets where we don’t have a breakdown by medium).
"By 2018 we forecast mobile advertising to grow to US$134 billion, well ahead of desktop’s US$US88 billion total, having overtaken desktop in 2017. Mobile will account for 60.3% of internet expenditure and 23.3% of all expenditure in 2018,” Zenith said.
But buried in the report is news that will bring a tiny bit of joy to the beleaguered companies and executives at legacy media groups – the rapid growth in mobile ad spending (and especially at Facebook and other social media platforms, plus Google), will hit desktop ad revenues almost as hard in coming years.
Zenith says online desktop advertising spending will start falling more quickly between now and 2018 and that decline will outpace the continuing slide in newspaper and magazine ad spend. Zenith forecast that worldwide desktop ad spending will fall by $US10.7 billion to a still heady $US88 billion.
Remember Zenith sees print ad spend falling $US5 billion to $US54 billion. Zenith said the fall for both reflects that more than doubling in mobile ad spend by 2018 from $US53 billion to $US134 billion.
Interestingly while US TV ad spend is forecast to rise 1% this after after a 5% slide in 20915, Zenith doesn’t see any gains whatsoever for the other legacy media business in trouble – print. In fact worldwide it sees newspaper and magazine advertising shrinking by $5US billion to $US54 billion.
But that is a slower loss than in the period 2011-2015 and Zenith believes the period of massive falls in spend has passed. Desk top ad spend is now clearly the area where mobile’s surge will hit hardest.
"Since it began in the mid-1990s, internet advertising (both desktop and mobile) has principally risen at the expense of print. Over the last ten years internet advertising has risen from 6% of total global spend (in 2005) to 30% (in 2015).
"Meanwhile newspapers’ share of global spend has fallen from 29% to 13%, while magazines’ has fallen from 13% to 7%. Print titles will continue to lose market share as their readers continue to move to online versions of the print brands or other forms of information and entertainment entirely.
"We predict newspapers and magazines will continue to shrink at average rates of 5% a year between 2015 and 2018, ending with 9% and 5% market shares respectively.
"Note that our figures for newspapers and magazines include only advertising in printed editions of these publications, not on their websites, or in tablet editions or mobile apps, all of which are picked up in our internet category. The performance of print editions does not describe the overall performance of newspaper and magazine publishers,” according to Zenith.
And is some good news for TV, although on the face of it, Zenith’s forecasts contain little comfort, but did a little deeper and the forecast sees TV maintaining its dominant position so far as advertisers are concerned.
"Television is currently the dominant advertising medium, attracting 37% of total spend in 2015. As mentioned earlier, however, we now expect the internet to overtake television to become the largest medium in 2017. Looking at the ad market as a whole, including search and classified, we think television’s share peaked at 39.5% in 2012, estimate it at 36.9% in 2015, and expect it to fall back to 33.8% by 2018.
“However, one of the reasons for television’s loss of share is the rapid growth of paid search, which is essentially a direct response channel (together with classified), while television is the pre-eminent brand awareness channel.
“Television does not compete directly against search, and indeed the two can complement each other, for example by running paid search activity to take advantage of the increase in searches driven by a television campaign.
"Taking internet classified and search out of the picture, television will remain the principal display medium for many years to come. We estimate television accounted for 44.3% of display expenditure in 2015, and will attract 42.9% in 2018,” Zenith forecast.
The big question is in our small and contracting legacy media market, is how will these slivers of good news impact investor attitudes to News Corp, Fairfax Media, Prime Media, Southern Cross, Ten Network, Macquarie Radio and Nine Entertainment.
Even though the Australian economy is growing as fast, if not faster than the US, ad spend growth here in TV, print and radio will remain sluggish as they battle falling audiences and rising costs.
