Zenith, part of Publicis Media India, has recently launched Zenith Advertising Expenditure Forecasts report for 2018.
According to the report, in 2014 advertisers spent 27 per cent of their budgets on internet advertising, which produced only 21 per cent of brand experience. By 2015, though, brands were using internet advertising more effectively: it accounted for 30 per cent of both budgets and paid brand experience, before tipping over in 2016, when brand experience exceeded budget share.
Zenith expects internet advertising's share of global adspend to continue to rise, reaching 40 per cent in 2018 and 44 per cent in 2020. Its value will rise from US$203bn in 2017 to US$225bn in 2020. The share of advertising expenditure allocated to internet advertising varies widely across the world. In the most advanced markets (Sweden and the UK) it will account for more than 60 per cent of total expenditure next year, and it will account for between 50 per cent and 60 per cent in another six (Australia, Canada, China, Denmark, Norway and Taiwan).
India is placed number 4 in the top ten contributors to global adspend growth 2017-2020.
India follows USA, China and Indonesia in that order. (See executive summary)
Between 2017 and 2020 the agency forecasts global advertising expenditure to increase by US$72 billion in total. The US will contribute 27 per cent of this extra ad expenditure and China will contribute 20 per cent, followed by Indonesia, India, the UK and Japan, which will contribute 4 per cent each.
Five of the ten largest contributors will be Rising Markets* (China, Indonesia, India, Brazil and Russia), and between them they will contribute 33 per cent of new adspend over the next three years. Overall, the agency forecasts Rising Markets to contribute 54 per cent of additional ad expenditure between 2017 and 2020, and to increase their share of the global market from 37 per cent to 39 per cent.
According to the report, in India, internet adspend will capture 11.6 per cent of the market in 2017. India is therefore a leading digital market/keeping pace with global developments/has a lot of scope for growth in internet advertising. Zenith forecasts 20.4 per cent growth in internet advertising in India in 2018, compared to 8.4 per cent growth for the market as a whole. By 2020, internet will account for 15.4 per cent of total adspends in India.
The rise of the internet has had huge consequences for the other media, which are covered in detail in the executive summary:
Big platforms are capturing digital growth
The internet is driving the great majority of global growth in advertising - it will account for 94 per cent of the growth in adspend between 2017 and 2020. And most of this will be captured by just five big platforms - Google and Facebook, plus the Chinese platforms Baidu, Alibaba and Tencent. Between them these five platforms increased their share of global internet adspend from 61 per cent to 72 per cent between 2014 and 2016, and captured 83 per cent of the growth in internet adspend over that time. Baidu, Alibaba and Tencent accounted for 54 per cent of the growth in internet adspend in China, while Google and Facebook accounted for 96 per cent of the growth in internet adspend in the rest of the world. Between them Google and Facebook accounted for 76 per cent of internet adspend outside China in 2016.
Big countries are adding most ad dollars
In dollar terms, most of the growth in global adspend is coming from a few big markets. The agency forecasts that just two countries - the US and China - will contribute 47 per cent of new ad dollars between 2017 and 2020. The five biggest markets - the US, China, Japan, the UK and Germany - will contribute 57 per cent.
Big cities are driving global adspend growth
Big cities are driving global adspend by concentrating growth in productivity, innovation and trade. The agency has conducted a unique study that attributes adspend to individual cities by estimating the value of their inhabitants to local, national and international advertisers. Zenith forecasts that the top 10 cities alone will contribute 12 per cent of all global adspend growth this year, and that the top 725 will contribute 60 per cent.
The agency predicts that between 2016 and 2019, adspend in the 10 biggest-contributing cities will grow by a total of US$7.5bn, representing 11 per cent of growth over these years. These ten cities will be, in descending order: New York (where adspend will grow by US$1.4bn), Tokyo, Jakarta, Los Angeles, Shanghai, Houston, Dallas, Beijing, London and Chicago (which will grow by US$0.6bn).
Advertisers feel the pressure from digital transformation and polarisation of growth
Advertisers are feeling pressure from the rapid transformation of their businesses, exemplified by the rapid shift of marketing communications to online media in response to changing consumer behaviour, and the polarisation of growth to big platforms, big countries and big cities. At the end of November the agency conducted the third in our series of exclusive surveys about brand growth among key Zenith clients. On a scale from 0 to 100 - where 0 means everyone expects decline in 2018, 100 means everyone expects growth, and 50 means the average expectation is for no growth - the average response was 57, down from 67 this time last year. Food and drink brands have been the least affected, with a score of 66 this year, down just a point from 67 last year. Packaged goods, retail and telecom brands have all fallen to 50, expecting no growth, down from positive scores last year.
Vittorio Bonori, Zenith's global brand president, says in a press release, "We are seeing a battle played out in business, marketing and media between big players and small players. Growth is coming from big countries and big cities, and being captured by big platforms. Brands should focus on upstream strategy, data-informed UX planning and downstream automation."
According to the report, year 2017 will close at Rs.53,918 crore, registering a slightly slower pace of growth is on account of demonetisation introduced in November 2016. Total adex for India will climb up to Rs. 58,422 crore, growing at 8.4 per cent in 2018, led by television.
Tanmay Mohanty, group CEO, Zenith India, says in a press release, " Growing Internet penetration accelerated by operators such as Jio will significantly enhance digital adspends in India and give access to previously untapped markets. India has seen some fluidity in overall ad-expenditure but remains one of the fastest growing advertising markets globally. With the dust settling down on demonetisation and GST, we expect a measured recovery on ad spends. Consumer confidence is definitely on the rise. In 2018, Mobile Handsets, FMCG, Automobiles, BFSI, Travel & Tourism and Political Ads will drive up the pace on adspends."
Growth rate for television is pegged at 9 per cent while newspapers will grow at 5 per cent. Radio will grow at 10 per cent, while cinema and out of home will grow at 5 per cent respectively.
Jonathan Barnard, head of forecasting and director of global intelligence, Zenith, says in a press release, "Internet advertising is the biggest advertising medium in the world and the biggest driver of growth. Our unique research shows that brands are starting to use it effectively after struggling to adapt over the last few years."
*Brand experience is a combination of two factors: reach (how likely consumers are to encounter brand messages at each touchpoint) and influence (how likely each message is to consumer attitudes or behaviour). It covers all touchpoints across paid, owned and earned media, but because we were comparing it to advertising expenditure, here we measured only the brand experience of paid media.
Touchpoints ROI Tracker is Publicis Media's brand contact measurement and planning tool, based on more than 9,50,000 consumer interviews since 2004.