State of play: Zenith Optimedia’s take on where local ad dollars are heading

ZenithOptimedia has once again gazed into its crystal ball and released its global adspend forecasts, including predictions for the New Zealand media marketplace. And both the global and local trends make for interesting reading.

ZO has predicted the total spend in New Zealand will stay fairly flat at just over $2 billion. And according to the figures, newspaper spending will drop to $500 million by 2014, down from $830 million in 2005, while magazines are heading for $180 million by 2014, down from $260 million in 2005.

That cash will largely be funnelled into online, with predictions of $500 million being spent there by 2014, a massive jump from $44 million in 2005 and $300 million in 2011.

TV is set to keep climbing back up close to 2005 levels with $654 million by 2014, and cinema and outdoor are expected to remain fairly flat.

Globally, ZO is forecasting a 4.3 percent growth rate in 2012, slightly down from the 4.8 percent forecast made in March. That equates to a total of US$502 billion by the end of the year. And it’s forecasting 5.3 percent and 6.1 percent growth for 2013 and 2014 respectively.

We have also downgraded Asia Pacific slightly from 7.4% growth this year to 6.7%, and Latin America from 9.2% to 7.8%. The advertising recovery remains robust in North America, however, which we have held steady at 3.6%, also holding the Middle East and North Africa at 1.0% while the political and social unrest continues.

In the longer term, we expect gradual but sustained improvement in ad expenditure in North America, Western Europe and the Middle East & North Africa in 2013 and 2014. Meanwhile Asia Pacific, Central & Eastern Europe and Latin America should all achieve 7% to 10% annual growth over these two years.

Advertising expenditure by region

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

US$ million, current prices. Currency conversion at 2011 average rates.

Between 2011 and 2014 we predict 60% of all the world’s growth in ad expenditure will come from developing markets (which we define here as everywhere outside North America, Western Europe and Japan). 50% will come from just ten developing markets. The four BRIC markets alone (Brazil, Russia, India and China) are forecast to account for 35% of global growth. Beyond the BRICs, there are six fast-growing markets we forecast to add between US$1 billion and US$4 billion each to the global ad market, and deliver another 15% of global growth: Indonesia, Argentina, South Africa, South Korea, Thailand and Turkey.

Beyond the BRICs: the next wave of emerging ad markets

Adspend growth (2014 v 2011)

US$ million, current prices. Currency conversion at 2011 average rates.

Source: ZenithOptimedia

In 2014 we predict Brazil will overtake the UK to become the fifth-largest ad market, and Russia will overtake South Korea to become the tenth-largest. After that, the next developing market to enter the top ten will probably be Indonesia, where we expect adspend to increase from US$5.3 billion in 2011 to US$9.3 billion in 2014. Indonesia’s ad market is currently slightly smaller than India’s, which was worth US$5.8 billion in 2011, but is growing substantially faster. We expect Indian ad expenditure to reach US$7.3 billion in 2014.

Top ten ad markets

US$ million, current prices. Currency conversion at 2011 average rates.

Global advertising expenditure by medium

The internet is by far the fastest growing medium – we forecast it to grow on average by 16% a year between 2011 and 2014. Display is the fastest-growing sub-category, with 20% annual growth, thanks to the rapid rise of social media and online video advertising. Display advertising is now growing substantially faster than paid search (which we forecast will grow by 15% a year to 2014) and classified (8% a year). Display advertising accounted for 36% of internet advertising in 2011; by 2014 we expect this proportion to increase to 40%.

Internet advertising by type

US$ million, current pricesCurrency conversion at 2011 average rates.

We estimate that social media advertising accounted for 14.4% of internet display in 2011. This includes only the paid-for ads appearing within social media sites like Facebook, Twitter and LinkedIn; it does not include any non-paid activity by advertisers on these sites, such as brand pages and promotions. Social media sites are now at or near the top of the list of most popular sites in developed markets, and are growing rapidly in popularity in the developing world. A third of all internet visits in the US now go to Facebook alone. Average costs are currently lower in social media than for other types of display, partly because advertisers are still learning how to engage consumers on these sites rather than intrude upon their conversations. But better targeting and new forms of advertising (such as Sponsored Stories on Facebook) helped prices rise throughout 2011, a trend we expect to continue. We forecast social media to grow at an average rate of 31% over the next three years, achieving an 18.5% share in 2014.

The growth of social media advertising

US$ million, current pricesCurrency conversion at 2011 average rates.

Source: ZenithOptimedia

Overall, we predict internet advertising will increase its share of the ad market from 16.0% in 2011 to 21.5% in 2014. Internet advertising already accounts for more than 25% of ad expenditure in six markets (Canada, Denmark, Norway, South Korea, Sweden and the UK), and by 2014 we expect it to account for more than 30% in six markets (Australia, Canada, Norway, South Korea, Sweden and the UK). In the most advanced market – the UK – internet advertising attracted 33% of expenditure in 2011, and we forecast it to attract 39% in 2014. There is clearly potential for the internet’s global market share to continue to grow for many years to come.

The internet is also the biggest contributor of new ad dollars to the global market. Between 2011 and 2014 we expect internet advertising to account for 55% of the growth in total expenditure. The next biggest is television, which we forecast to contribute 42% of growth. Television’s share of the global ad market has risen steadily over the last few years: it reached 40.2% in 2011, up from 36.9% in 2005. The amount of time viewers spend watching television has increased, and even though viewers are presented with a wider choice of channels than ever, the biggest television events are attracting record audiences. We expect the popular televised quadrennial events to lift television’s share to 40.4% in 2012.

The internet has risen principally at the expense of print. Between 2001 and 2011 the internet’s share of global advertising rose by 14 percentage points, while newspapers’ share fell 12 points and magazines’ share fell by 5 points. Magazines have suffered less than newspapers, because the experience of reading a magazine is less easy to replicate online, and because they do not rely so much on the timely delivery of information, where the internet has a big advantage over newspapers. We forecast newspaper advertising to continue to shrink, by an average 1.2% a year over the rest of our forecast period, but we expect magazine advertising to stabilise in 2014. Note that these figures 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 prospects for newspaper and magazine publishers are therefore not quite as bleak as our headline figures would make them appear.

Advertising expenditure by medium

US$ million, current pricesCurrency conversion at 2011 average rates.

* The totals here are lower than the totals in the ‘Advertising expenditure by region’ table above, since that table includes total adspend figures for a few countries for which spend is not itemised by medium.

Share of total adspend by medium (%)