MAGNA has released its latest Advertising Revenue Forecast (Spring Update) which predicts the global advertising marketing will grow +5.4% in 2016.
Full-year forecast increased following strong 1Q in most markets
Ad market experiences strongest growth in six years
US market to grow by +6.2%
TV ad sales driven by stronger pricing and major events
Digital media will surpass TV globally by 2017
Top Stories / Key Findings
Globally, media owner advertising
revenues will grow by +5.4% in 2016, to $480 billion, and by +3.1% in
2017. That compares with +4.8% in our previous forecast (Dec. 2015).
The
biggest contributors to the higher 2016 growth forecast are the US
(revised from +5.7% to +6.2%) and China (from +5.5% to +8.4%). The
biggest downward revision comes from Brazil (from +5.0% to +1.9%).
2016's
major events (US elections, UEFA Euro 2016, Olympic Games, Copa
America) will boost ad spending. Neutralizing the impact of those
cyclical events, media owners ad sales would still grow by +4%.
Of
the 72 markets analyzed by MAGNA, 67 are expected to experience
advertising revenue growth this year and only five will decrease,
compared to 15 last year.
US advertising sales will grow by +6.2% in 2016 to $179 billion, the strongest growth rate since 2010.
Neutralizing the incremental spending generated by political and Olympic Games (a record $3.5 billion),
2016 advertising growth would be +4.1% (similar to last year) and will slow down to +3.4% in 2017.
US digital advertising sales will equal TV sales for the first time in 2016 (both $68 billion, a market share of 38.5%).
Digital media advertising sales will grow +15% this year while traditional media will be flat (+1%).
Digital
media will become the number one media category globally by the end of
2017, as digital advertising sales will reach $192 billion (a 39% market
share), surpassing TV at $178 billion (a 36% market share).
Global
TV advertising sales will grow by +4.4% to $179 billion and out-of-home
(OOH) media by +3.8% to $31 billion). Radio advertising revenues will
be flat (-0.2% at $32 billion) and print will continue to decline (-8%
to $70 billion).
Digital advertising sales are driven by mobile
advertising (+44%), video formats (+35%) and social formats (+43%) and
search (+14%) while banner sales will decline (-6%).
Mobile advertising will account for 42% of total digital ads by the end of 2016 and near 50% by the end of 2017.
Linear
television advertising sales (+4.4%) will record their strongest growth
since 2012, boosted by cyclical events and strong pricing offsetting
the continued erosion of viewing.
Western Europe advertising
revenues will grow by +3.8% to $100 billion, driven by the UEFA Eurol
event and assuming "Brexit" does not happen; Eastern Europe advertising
sales will increase by +5.3% to $16 billion.
Asia-Pacific media
sales will reach $139 billion (+6%) while recession-stricken LatAm will
grow by only +3.3% (previous forecast +5%) despite hosting the 2016
Summer Olympics.
Global Overview
Globally,
media owner advertising revenues will grow by +5.4% in 2016, to $480
billion, and by 3.1% in 2017. That compares with +4.8% and +3.2% in the
December 2015 forecast.
This year's events (US elections, UEFA Euro
2016 , Summer Olympics in Brazil, and 
Copa America in the US) will
generate incremental advertising spending and thus boost media owner
advertising revenues compared to 2015 (when no such events took place.)
Neutralizing the impact of those cyclical events in 2015, 2016 and 2017,
the global advertising market would grow by approximately +4% in both
2015 and 2016, which suggests no significant acceleration in the
underlying ad demand beyond the cyclical drivers, as the economic
environment remains uncertain.
MAGNA's +5.4% prediction for
global growth in 2016 is the result of digital media advertising sales
growing +15% while traditional media advertising sales will be flat
(+1%). The only traditional media categories to see increasing
advertising sales will be television (+4.4% at $179 billion) and
out-of-home media (OOH) (+3.8% at $31 billion). Radio will be flat
(-0.2% at $32 billion) and print media advertising revenues will
continue their long-term decline (-8% to $70 billion) caused by audience
erosion.
Digital media advertising sales will increase by +15%
to $170 billion globally this year, driven by mobile advertising (+44%),
video formats (+35%) and social formats (+43%) while search remains
robust (+14%) and banner format sales in decline (-6%) due to ad
blocking and the competition of other formats. Digital media advertising
sales will reach $192 billion (a 39% market share) by the end of 2017,
surpassing TV at $178 billion (a 36% market share) to become the number
one media category globally. Mobile advertising will account for 42% of
total digital advertising by the end of 2016 and will approach 50% by
the end of 2017, reflecting further shifts in digital media usage by
consumers and related strategies by marketers.
Television
advertising sales are predicted to increase by +4.4% this year (to $179
billion), of which approximately 2% is due to the cyclical events of
2016. Above and before the direct impact of those events, television
sales have been strong in many large markets in the first quarter of
2016 (US, U.K., France, Italy, Germany, etc.) as an increasing CPM
inflation offsets ratings erosion.
Globally, inflation on Free TV
channels was +6% in 2015 on a CPM basis (an average +4% in North
America and Europe and +7% in APAC). MAGNA predicts television cost
inflation to increase to +7% in 2016-2017 and +8% in North America. In
most mature markets inflation is driven by declining linear audiences
and ratings, leading to shortages of supply. This is particularly clear
in the US where this scarcity is creating a very competitive scatter
market, with "premiums" in the double-digits for the first time in over
two years.
Another driver for television globally is more dynamic
spending exhibited by some traditional large TV- centric categories
(automotive, personal care, food and beverages) since 2015. Growth in
those sectors was caused by a healthier market (car sales finally
recovering in Europe) and in some cases by marketers slowing down the
diversification to digital media and re-allocating budgets to linear
television. The premiere sporting events in 2016 are sure to draw
additional spending in male-oriented categories such as auto and
beverage in particular.
Of the 72 markets analyzed by MAGNA in
this update, 67 are forecasted to experience advertising revenue growth
this year and only five (Singapore, Finland, Ecuador, Kazakhstan, Hong
Kong) will experience a decrease, compared to 15 in 2015. The biggest
contributors to the higher 2016 forecast are the US (from +5.7% to
+6.2%, including cyclical events) and China (from +5.5% to +8.4%). The
biggest negative revision comes from Brazil where a deep economic
recession is aggravated by political uncertainty (from +5.0% to +1.9%).
In
the US, media owner advertising sales will grow by an estimated +6.2%
in 2016 to $178 billion, and will grow again by +1.2% in 2017. This will
be the strongest annual growth since 2010 (+6.6%). Digital media will
equal TV advertising sales for the first time ever (both $68 billion, a
market share of 38.5%).
Even-year events (Elections and Olympics)
are expected to bring a record incremental advertising spend of $3.5
billion, mostly directed towards television. Neutralizing the estimated
impact of these events on US media owners advertising revenues,
year-over-year growth would still be +4.1% this year, instead of +6.2%.
Western
Europe advertising revenues will grow by +3.8% in 2016 to reach nearly
$100 billion, as France and Italy finally join the U.K. and Spain to
show relatively positive growth. Regional growth will then slow down to
+2.2% in 2017. In Central and Eastern Europe, advertising revenues are
predicted to increase by +5.3% in 2016 (to $16 billion) and then by
+4.8% in 2017.
In Asia-Pacific, media owner advertising sales
are forecasted to increase by an estimated +6.0% this year (to $139
billion) and by +4.9% next year.
The weakest region this year
will be Latin America, as the slowdown in advertising sales, which
started last year, proves longer and deeper than expected. This is
mostly caused by an economic environment that gradually worsened since
the second half of 2015, and was aggravated by the political crisis in
Brazil this year. The 2016 Summer Olympics, hosted by Brazil,, won't be
enough to offset the advertising slowdown in the region. Advertising
sales will grow by +3.3% to $22.6 billion (previous forecast: +5.4%)
which means a decline in real terms, as economic inflation is typically
much higher in most LatAm markets.
Says Vincent Letang, EVP,
director of global forecasting at MAGNA and author of the report:
"Advertising sales were dynamic in the first quarter of 2016, for both
television and digital media, in many large markets (including US, U.K.,
Germany, Italy and France). The mixed economic outlook and political
uncertainty (Brazil, "Brexit") is likely to gradually reduce the level
of growth in the remainder of the year and in 2017, but full-year 2016
global growth (forecast at +5.4%) should remain the strongest in six
years (since +8.5% in 2010) thanks to cyclical events and stronger
television pricing."
Digital Media Will Account for Half of the World's Ad Sales by 2020
Globally,
digital advertising increased by +18.3% in 2015 to $149 billion. It is
expected to increase by double-digits again this: +14.8% to $170
billion. This is higher than previous expectations, following a strong
first quarter in many large markets.
Because of the critical mass
reached by digital media spend in most markets, growth rates will
gradually slowdown in the following years (+12.5% in 2017), although
digital will remain by far the fastest-growing media category. In 2016,
digital will grow to represent 36% of total advertising budgets, nearly
matching TV's format-leading 37% share. As previously forecasted by
MAGNA, digital will then surpass TV and become the largest advertising
category in 2017.
Digital advertising will grow by a CAGR of
+12% through 2020, at which point it will represent $263 billion, or
nearly half of global advertising spend.
Mobile is now the main
driver of digital advertising, as usage quickly transitions towards
mobile devices. Mobile advertising sales grew by +61% last year to reach
$51 billion, representing just over one-third of total digital spend.
Mobile advertising revenues will further increase by +42% in 2016 to
reach 42% of total digital advertising sales, and with 2017's +30%
growth, mobile will approach half of total digital advertising budgets.
All digital growth in 2016 will come from mobile spend, with desktop
actually shrinking by -0.3%. By 2020, mobile will represent two-thirds
of total digital spend, and will grow by an average +28% CAGR through
2020.
Much of the growth in digital media spending comes from the
growth of programmatic spend. Within banner display and video formats,
programmatic spend will grow from $14.2 billion in 2015 to $19.5 billion
in 2016, and ultimately to $36.8 billion by 2019. In 2015, programmatic
transactions represented 31% of total banner display and video
advertising sales, but by 2019 the growth of programmatic in video
especially will push total penetration to 50%. This doesn't even
consider the fact that search and social are already essentially 100%
programmatic. When looking across all digital formats, the portion of
digital budgets that are transacted programmatic through a technology
platform is already approaching three quarters of total digital spend.
The opportunity for advertisers and agencies to leverage consumer data
and behavioral data in branding campaigns to achieve improved targeting
and efficiency, is making display and video formats more attractive to
some mainstream categories such as automotive, finance and CPG/FMCG, and
thus contribute to the overall growth of digital media spend.
Paid
Search remains the largest portion of digital advertising budgets,
representing nearly half of total digital spend. In addition, 2016's
expected growth rate of +14% (+2% desktop growth, +38% mobile growth)
means that search will again provide the largest total dollar increase
year-over-year across all digital formats (nearly $10 billion globally).
This is after a strong first quarter, in which search grew by +17%.
Search advertising alone will grow to $83 billion in 2016, larger than
total print advertising spend (newspapers and magazines combined) which
represents $70 billion. Search remains attractive and relevant in part
thanks to the new functionalities that Google has introduced in the last
15 months, including the ability to bid for tablet and mobile
impressions, as well as the introduction of "Remarketing Lists for
Search Ads" and incorporating "Similar Audiences" targeting properties.
This makes search more attractive for brand advertising, in addition to
its core user base of "long tail" direct response marketers and local
businesses. From the perspective of large, brand-oriented advertisers,
these functions make it easier to incorporate unified audience targeting
across search, display and video. Even in markets where Google is not
dominant, such as in China, Baidu and other competitors are experiencing
equally impressive growth.
Behind search advertising, social is
the next largest driver of incremental dollars in digital advertising.
Social media advertising sales will grow by +38% in 2016 to $31 billion,
following 2015's +50% growth.
This is partially the result of a
very strong first quarter, in which social media advertising sales grew
by over +50% globally. Growth in 2017 will remain strong at just over
+20%, and by the end of 2017 social will represent 20% of total digital
advertising budgets. Search and social combined represent 85% of total
incremental dollars in digital advertising in 2016. More than any
digital format, social is driven by mobile usage. Not only will mobile
advertising represent more than 80% of total social spend in 2016, but
essentially all of social growth comes from mobile.
Desktop is
expected to be barely positive in 2016, however, up from previous
expectations that desktop spend would shrink. This is because the launch
of Facebook video is lifting all ships as more valuable inventory is
introduced. Having reached well over a billion users, social networks
fueled advertising sales growth by increased time spent and increased
revenue per user, driven by the roll-out of video in the last 18 months.
In the US, we believe that video formats represented already 12% of
total social media advertising sales in 2015 and is growing rapidly.
(Note:
for the time being, and to avoid double-counting, social video
advertising sales are included in MAGNA's "Social" totals, and not in
the "Video" totals in the MAGNA US main breakdown). While online video
advertising is still smaller than search and social, it is growing
rapidly, with +35% growth expected in 2016 following a dynamic quarter
(+42%). Online video is also driven by mobile advertising (as mobile
bandwidth and mobile experiences both improve), desktop growth remains
robust at +23% expected growth in 2016.
Display advertising
brings up the tail-end of digital budgets, with slowing mobile display
growth cancelling out negative desktop display growth in 2016. Over the
long-term, display growth will shrink as advertisers favor more
impactful search, social and video advertising inventory and display
formats are impacted by growth in ad blocker usage.
The next Global Advertising Revenue Forecasts by MAGNA will be published in December 2016.
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