2022 -  Q2

Global ad market on track for 8% growth in 2022

According to Zenith’s Advertising Expenditure Forecasts, North America will be the strongest region with 12% ad spend growth this year, with online video and social media ad spend growing 15% per year until 2024.

Global ad market on track for 8% growth in 2022

• North America will be the strongest region with 12% adspend growth this year
• The cost of television advertising to rise 11%-13%
• Online video and social media adspend to grow 15% annually to 2024

Global advertising expenditure is forecast to grow 8.0% in 2022, according to Zenith’s latest  Advertising Expenditure Forecasts report, published in June 2022. This represents a minor  downgrade from the 9.1% growth rate Zenith published in December 2021. Growth will be  supported by the Winter Olympics, mid-term US elections and soccer World Cup, which for  the first time will take place in the most advertising-intensive period of the year in the run-up  to Christmas. Faced with this tough comparison, growth will slow to 5.4% in 2023, before the  Summer Olympics and US presidential elections help boost it to 7.6% in 2024.

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Zenith’s forecasts for North America, MENA and Western Europe this year are unchanged at  12%, 7% and 6% growth respectively. Latin America was downgraded slightly from 9% to  8%, but Asia Pacific was upgraded from 6% to 7%, thanks to a very strong performance  from India. Severe disruption in Russia and its closest trading partners after the invasion of  Ukraine will lead to a 26% decline in adspend in Central & Eastern Europe, even though  most other markets in the region will continue to grow.

“Advertising spending is on track despite the macroeconomic headwinds this year. High inflation – concentrated mainly on essential consumer goods such as heating, petrol and food – is forcing consumers to reallocate their spending by default, but for now consumer spending continues to rise. In the aftermath of the pandemic, demand for travel and leisure experiences is rising, business confidence is generally high and business investment is on the rise. Therefore, there are currently few signs of widespread cost-cutting.” – said Rita Horváth, head of media agencies at Publicis Groupe Hungary, including Zenith.

India to lead growth with 21% expansion this year

Global adspend is forecast to increase by US$58 billion in 2022, rising to US$781 billion  from US$723 billion in 2021. Most of the new ad dollars will come from the US, which is forecast to expand by US$33 billion in 2022, driven by continued, rapid digital  transformation, accounting for 57% of all the money added to the ad market this year. China,  Japan, and the UK come next, supplying 9.1%, 6.2%, and 5.8% of new ad dollars, respectively. India is in fifth place, accounting for 4.6% of the growth in adspend this year,  even though it is only the twelfth-largest ad market. India will be the fastest-growing market  in percentage terms, expanding by 20.8%, driven by election advertising and the resumption  of festivals that were cancelled at the height of the pandemic.

Higher prices in traditional channels accelerate shift to digital alternatives

The sustained growth in demand from advertisers is pushing up media inflation, particularly  in television, where the supply of audiences is falling steadily as viewers switch to  alternatives. Price rises vary widely for different audiences in different countries, but the  global average cost of television advertising across all audiences is expected to rise by 11%- 13% this year. Online video prices are expected to increase by about 7%, although in this  case the supply of audiences is rising. Other digital channels where supply is climbing and  volumes are flexible are inflating only modestly, with 3% average price rises forecast for  social media and other digital display. Out-of-home and radio prices will go up about 4% this  year, while print prices will remain stable, because demand for advertising in printed  publications is falling as rapidly as readership.

Brands that simply buy broad audiences to achieve reach targets will not be able to avoid  having to spend more to reach the same audiences. But brands that use first-party data to  identify their most profitable customers, and combine it with third-party data to target their  best prospects in the most efficient channels, will be able to mitigate much of the effect of  media inflation. The huge and growing volume of digital content consumption is making it

more effective for brands to scale by aggregating digital audiences. Zenith predicts 62% of  ad budgets will be spent on digital media in 2022, up from 59% in 2021, and that this  proportion will reach 65% in 2024.

“In a world where trading is becoming dominated by auctions, competitive advantage is  achieved not by scale, but by data,” said Ben Lukawski, Global Chief Strategy Officer,  Zenith. “Inflation will hit cheap reach buyers hard, but brands that make smart use of their  data will manage costs and grow their business at the same time.”

Online video overtakes social media as the fastest-growing channel for the first time in past decade

Online video is now predicted to be the fastest-growing channel over the next three years:  Zenith forecasts it will grow 15.4% a year on average between 2021 and 2024, driven by the  rapid development of connected TV, ad-funded video-on-demand, streaming and other video  formats. Connected TV is now a mainstream video platform in the US, with a higher  penetration than cable TV, and is becoming established in other markets, especially in  Western Europe and Asia Pacific. The introduction of cheaper ad-funded tiers by SVOD  services like Netflix and Disney+ will boost growth further by providing new high-quality  environments for brand communication. Mixed video-on-demand models that combined  subscriptions with advertising will also help online video audiences continue to grow across  the world by recruiting consumers unwilling or unable to afford the growing roster of  subscription-only services. Zenith expects online video adspend to rise from US$62 billion in  2021 to US$95 billion in 2024.

Online video will overtake social media, the fastest-growing channel for the previous nine  years. Social media adspend (which includes video ads in social media feeds) is still forecast  to grow at an average rate of 15.1% a year between 2021 and 2024, propelled by rising  competition among platforms that is driving continued innovation on formats and closer  integration with commerce. Meta’s share of social media adspend outside China has been  falling steadily since it peaked at 89% in 2019, reaching 85% in 2021 as TikTok, Snapchat,  LinkedIn and Pinterest gained market share. Zenith forecasts social media adspend will rise  from US$153 billion in 2021 to US$187 billion in 2022, when it will account for 25% of  expenditure on advertising across all media.

Cinema and out-of-home will take third and fourth place among the fastest-growing media,  averaging 11.9% and 8.0% annual growth between 2021 and 2024 respectively. These are  still recovering from the deep losses they suffered in 2020 and 2021 when cinemas were  closed, and consumers were confined indoors. Cinema and out-of-home have a lot of  ground to make up, however, and are taking their time to do so. Many brands that were  forced to find alternatives, often digital, have found them effective, and see little need to shift  their budgets back again. Zenith expects cinema adspend to reach US$3.9 billion in 2024,  well below its pre-pandemic level of US$4.8 billion in 2019, while out-of-home will reach  US$45.0 billion in 2024, exceeding the US$42.3 billion it achieved in 2019 for the first time.

Linear television advertising is forecast to grow by 1.1% a year on average between 2021  and 2024, from US$173.6 billion to US$179.2 billion, as price rises continue to compensate for loss of audiences. This ongoing decline in reach and efficiency will drive brands to digital  channels, however, including online video. Television’s share of total adspend is forecast to  fall from 24.6% in 2021 to 20.8% in 2024, while online video’s share increases from 8.8% to  11.1%.

“Online video is growing by creating new opportunities for building brand awareness,  complemented by social media’s capacity for cost-effective targeting with low barriers to  entry,” said Jonathan Barnard, Head of Forecasting, Zenith. “Online video is steadily  narrowing the spending gap with television, and will be half as large as television by 2024.”