WPP’s GroupM, the world’s leading media investment management group, recently released its “This Year, Next Year” 2016 global ad expenditure forecast and outlook for 2017. It forecast that 2017 advertising is predicted to grow 4.4% to hit US$547 billion.
GroupM is Kantar’s sister company within WPP.
Against the backdrop of a weak and precarious global recovery, China’s growth stability owes much to macroeconomic stimulus measures that smooth needed adjustments in both the tangible economy and the financial sector.
With late-year growth, GroupM China revises 2016 to +7.9%, up from 6.6% predicted earlier. FMCG advertising rose 4.6% in the second quarter year-on-year, much faster than the 2.0% growth forecasted. Continuing urbanization and solid consumer confidence lend ample support for continued growth, but China no longer boasts recent double-digit rates. Coming off of peak growth, GroupM expects digital advertising in China will grow 29.5% in 2016 and slow to 21.5% next year.
China and the United States account for half of all net growth in the 2016 and 2017, with China taking back a narrow lead over the US. The upward revision to China and a fractional downward revision to the US restores China to the top-contributor slot it has occupied for eight of the nine years 2008 - 2016.
In 2017, digital advertising’s share is expected to reach 33%. In 2016, digital captured 72 cents of every new ad dollar (US dollar), and TV 21 cents. In 2017, digital will capture 77 cents per new dollar, TV will get 17 cents.
The US remains the other principal growth contributor. GroupM fractionally upgrades 2016 growth from 3.1% to 3.2%. This includes revising TV from 3.4% to 4.1%, matching growth in the preceding election years (2012, 2014). This year’s less robust election spending was compensated with Summer Olympics demand. There was some redirection of budgets from digital to TV, particularly by the pharmaceutical and CPG categories. For 2017, GroupM shaves growth to 2.6% on the basis of the weak global and US GDP growth, and political uncertainty which as yet has not impacted budgets.
The UK Brexit vote has impacted financial markets, but to date has not impacted advertising. GroupM recently revised its UK forecast up to a digital-fuelled 7% annual run-rate, delivering a prospective US$3.0 billion incremental investment over the two years 2016-2017. This compares to US$3.3 billion from the rest of the EU combined.
Elsewhere in the BRICS, GroupM sees that Brazil is emerging from recession, after reaping Olympics benefits. There is increased digital adoption, particularly in mobile; since the beginning of the year mobile users grew 22% to reach 74 million. Modest ad growth of 2% in 2017 is predicted, enough to keep Brazil the world's number-five ad economy (US, China, Japan, UK, Brazil, Germany).
India remains, by far, the fastest growing market in the world's 10, US$10B plus ad markets. Growth is forecast at 13.8% in 2016 and 12.5% in 2017, with an economy fuelled by low interest rates, sustained urban demand and the impact of key reforms.
Russia’s rapid recovery since the first quarter continues, prompting revision of the 2016 forecast up to 9.5%. Higher demand for TV in Q4 and growth in paid search are key contributors. While over half of paid search demand is from smaller businesses that cannot afford other media, demand from larger advertisers is strong as well. Ten percent growth is predicted for 2017, driven by TV and Internet.
“Ad growth has shadowed the global economy's long, low and level recovery cycle since 2010. These new forecasts emphasize the ad story of our times is however structural, not cyclical. Twenty years on from the internet becoming a measured ad medium, digital remains the engine of advertising growth and disruptor-in-chief of the entire marketing economy,” said GroupM’s Futures Director, Adam Smith. “This multiplies options, opportunities and risk. The importance to advertisers of autonomy and diligence has never been higher.”