The participation of the Internet in advertising investment will go from representing 15.9% in 2011 to 21.2% in 2014, and will exceed 30% in four markets.
Advertisers are in a better position to invest in marketing than at the beginning of the crisis. They can use their liquidity reserves to gain market share and stimulate demand
ZenithOptimedia estimates that the global advertising investment will end this year at US $ 464,000 million, a figure 3.5% higher than in 2010, and will continue to increase to represent US $ 486,000 million – at a growth rate of 4.7% – despite the continued economic slowdown in Europe and fear that the debt crisis will worsen further. For 2013, we forecast an investment increase of 5.2% and 5.8% for 2014.
This acceleration in world investment is the result of what we call the quadrennial effect and the Japanese recovery after the March earthquake. The quadrennial events – the celebration of the Olympic Games, the European Football Championship, the presidential elections in the USA etc … – offer a reliable stimulus to the global advertising market. We think that this time this positive effect along with the recovery in Japan will contribute US $ 7,000 million to investment in 2012. Without this extra stimulus next year’s investment would only increase by 3.1%, slightly lower than this year’s rate.
It may surprise the strength of the global advertising market, while the entire eurozone threatens to fall into recession again and sink its business partners. However, advertisers are in a very different situation from the beginning of the 2008 crisis. In general, we can say that in these years they have accumulated their liquidity reserves that they no longer want to continue accumulating.
Advertisers have learned well the lesson of the last recession, especially with the fact that crises are optimal to expand participation in their brands in the market. During periods of recession, consumers fundamentally reexamine their consumption habits, partly to save money, partly to be able to indulge in these dark times. Those brands that earn the loyalty of consumers during these difficult times will reap their benefits in the coming years. We therefore expect advertisers to invest their liquidity reserves in this battle to gain market share and stimulate extra consumption.
Western Europe is currently at the center of a major economic upheaval and we expect it to grow by 2.0% in 2012, despite the fact that the Olympic Games are held in the United Kingdom – which means that sports broadcasts will be made at a favorable time for the Olympic Games. European audiences – and that most of the large European markets participate in the European Championship. Starting from the basis that the economy will improve throughout 2012, we expect a growth in advertising investments of 2.8% in 2013 and 3.3% in 2014. Our forecasts assume that GDP continues to slow down in the Eurozone – and the rest of Europe Western – until the end of 2011 and beginning of 2012. However, The economic situation is extremely uncertain and susceptible to worsening, therefore we have taken into account the potential effects of a deterioration of the debt crisis in Europe. This would clearly negatively affect advertising investment in the Eurozone but would have a very limited effect on global growth. If we look at other cases of debt crisis such as the Russian of 1998 or the Argentine of 2002 … we see that if two countries of the Eurozone generate defaults at the same time that there is a greater recession in the rest of European countries there would be a decrease in advertising investment in Western Europe of -4% but world investment would still grow at a rate of 3.2%. This would clearly negatively affect advertising investment in the Eurozone but would have a very limited effect on global growth. If we look at other cases of debt crisis such as the Russian of 1998 or the Argentine of 2002 … we see that if two countries of the Eurozone generate defaults at the same time that there is a greater recession in the rest of European countries there would be a decrease in advertising investment in Western Europe of -4% but world investment would still grow at a rate of 3.2%. This would clearly negatively affect advertising investment in the Eurozone but would have a very limited effect on global growth. If we look at other cases of debt crisis such as the Russian of 1998 or the Argentine of 2002 … we see that if two countries of the Eurozone generate defaults at the same time that there is a greater recession in the rest of European countries there would be a decrease in advertising investment in Western Europe of -4% but world investment would still grow at a rate of 3.2%.
North America is going through a healthier situation than Western Europe. In the US, industrial production and employment are growing at the same time as foreclosures are decreasing. Retail sales grew by 7% in October, and sales of ‘Black Friday’ rose by 6.6% and reached a record of US $ 11.4 billion. During the crisis Canada has hardly been affected. We anticipate a growth of 3.6% for North America in 2012, 3.7% in 2013 and 4.4% in 2014.
In Japan, we estimate that advertising investment will grow 3.1% next year as it recovers from the damage caused by the March earthquake and tsunami that affected the media and the advertising sector for weeks. After this initial boost, the forecast for growth in 2013 is 1.9% and for 2014, 2.5%.
Much of the global growth in advertising investment comes from developing countries that will contribute 58% of new investment between 2011 and 2014. Asia Pacific, Central Europe & East and Latin America are growing much faster than the developed world. In the next three years in the Asia Pacific area (except Japan) advertising investment will grow by 10.4% per year. Central Europe & East will do so at a rate of 9.6% and Latin America at 7.3% per year.
The exception is found in the Middle East and North Africa, where political turmoil is affecting the production and distribution of media and caused that advertisers distrust the possibility of generating negativity on their brands. We expect the Middle East and North Africa to grow an average of 1.3% between 2011 and 2014. In general we expect developing markets – all countries except North America, Western Europe and Japan – to increase their share of the global advertising market by 32.3% in 2011 to 35.9% in 2014.
In the next 3 years approximately half (48%) of the global growth in advertising investment will be generated in these ten developing countries. The four BRICs – Brazil, Russia, India and China – are projected to contribute 33% of global growth. Beyond the BRICs, there are six rapidly growing markets that will add between US $ 1,000 million and US $ 4,000 each to the advertising market and produce 15% of global growth: Indonesia, South Africa, Argentina, Turkey, Mexico and Korea. South. In these ten markets, advertising investment accounts for 0.32% of its GDP today, less than half of the world average which stands at 0.70%, which demonstrates the enormous growth potential. There are two markets in development in the TOP 10 advertising group and there will be three in 2014. China is currently the third largest advertising market and is rapidly approaching the second place corresponding to Japan. In 2005, advertising investment in China represented 23% of the size of the advertising market in Japan; in 2011 it already represents 66% and for 2014 it will be 95%. Brazil, currently in the sixth place, represents 84% of the size of the United Kingdom in 2011 and will be 91% in 2014. Russia, which occupies the eleventh position will be tenth in 2013 and ninth in 2014.
Global investment by means
Internet will continue to grow faster than any other medium, and will do so at an average rate of 15.9% per year between 2011 and 2014. Display is the most active segment with an annual growth rate of 18.9%, led mainly by online and social video half. Video streaming flourishes extremely fast, thanks to the development of “do-it-yourself” tools that have allowed local advertisers to enter this advertising segment. In most developed markets social media websites are close to the top of the most visited websites, unlike their competitors, users spend much more time browsing them.
Other digital media is developing new tools and formats that allow them to compete with social sites. Paid search grows at 15.7% per year, but its growth is being slowed slightly by changes in searches, from the computer to mobile devices where costs are lower. Digital classified ads grow slowly, 9.2% per year, while employment and the real estate sector remain weak in the main developed markets.
The Internet is also the largest contributor of new investment to the global advertising market. Between 2011 and 2014 we estimate that Internet advertising represents 52.9% of the growth on the total investment. Paid seach will represent 25.6% of this contribution followed by display with 22.6%, and classified ads with 4.7%.
In general, we estimate that the Internet will increase its participation in the advertising market from 15.9% in 2011 to 21.2% in 2014. As of today there are four countries – Denmark, Norway, Sweden and the United Kingdom – in which advertising on the Internet represents more than 25% of the total. By 2014 it will represent more than 30% in Canada, Norway, Sweden and the United Kingdom, so the growth potential of this medium is a reality
Internet advertising is now clearly dominated by Google, which has increased its share in this business from 34.9% in 2006 to 44.1% in 2010. In these years, Google has strengthened its position in global searches – from representing 72% in 2006 to 85% current – and has taken the lead in display and online video with the help of acquisitions and development of companies such as DoubleClick and YouTube. During these three years its initial competitors – Microsoft, Yahoo! and AOL- have not been able to keep up and have lost market share. Their combined participation was 33.1% in 2006 and in 2010 the 3 companies represented only 13.8%.
Since 2006 Facebook has become a great provider and has seen its position develop from 0.2% to 3.1% in 2010. Last year Facebook doubled its share and surpassed AOL; if it continues its current pace of growth it will overtake Microsoft in the online advertising market by the end of this year 2011.
After Internet, the medium that contributes the most to global growth is television that will incorporate 41.1% of the new investment between 2011 and 2014. The participation of television in the global advertising market has increased steadily over the last few years: we foresee to end this financial year 2011 representing 40.2% of the total investment while in 2005 it represented 37.0%. The time that the television viewers spend in front of the television has increased and although the offer of channels has increased as well certain television events accumulate record audiences. The sports events of 2012 will increase the participation of television to 40.4% that year, but beyond this moment we expect a very slight decrease to 40.3% in 2013 and 2014, as it always happens after a year of the so-called quadrennial.
Press and magazines have been declining since 2007, with a brief pause for journals in 2010. We expect this decline to continue during the study period.
Magazines suffer less than the press because the experience of reading a magazine is more difficult to replicate online, and because at the same time they are less dependent on current news where the Internet shows its great advantage over the paper press. We anticipate that the investment in magazines will decrease 0.7% per year and that the press will do so at 1.1% until 2014.