Digital to account for 44% global ad spend in 2020: Zenith
Amid growing debate as to whether brands are overspending on digital media, Zenith research has found that the effectiveness of internet advertising has now caught up with digital ad spend.
Until 2015, brands struggled to make effective use of internet advertising, and their spend was not matched by the resulting ‘brand experience’ (an accurate proxy of market share*). However, by 2016 internet advertising accounted for 34 per cent of global ad budgets but produced 35 per cent of brand experience. Internet advertising is now therefore working harder than advertising in other media.
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 ad spend 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).
The internet is driving the great majority of global growth in advertising – it will account for 94 per cent of the growth in ad spend 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 ad spend from 61 per cent to 72 per cent between 2014 and 2016, and captured 83 per cent of the growth in internet ad spend over that time. Baidu, Alibaba and Tencent accounted for 54 per cent of the growth in internet ad spend in China, while Google and Facebook accounted for 96 per cent of the growth in internet ad spend in the rest of the world. Between them Google and Facebook accounted for 76 per cent of internet ad spend outside China in 2016.
In dollar terms, most of the growth in global ad spend is coming from a few big markets. We forecast 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 ad spend by concentrating growth in productivity, innovation and trade. We have conducted a unique study that attributes ad spend to individual cities by estimating the value of their inhabitants to local, national and international advertisers. We forecast that the top 10 cities alone will contribute 12 per cent of all global ad spend growth this year, and that the top 725 will contribute 60 per cent.
Zenith predicts that between 2016 and 2019, ad spend 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 ad spend will grow by US$1.4bn), Tokyo, Jakarta, Los Angeles, Shanghai, Houston, Dallas, Beijing, London and Chicago (which will grow by US$0.6bn).
“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,” said Vittorio Bonori, Zenith’s Global Brand President.
“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,” said Jonathan Barnard, Head of Forecasting and Director of Global Intelligence at Zenith.
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