As the year comes to a close, MAGNA Global has revisited its advertising revenue forecasts and highlighted that global ad revenues reached USD 503 billion this year, showing a growth of 3.2 per cent. This is lower than the previous forecast (3.9 per cent in June 2015) and represents a slowdown compared to the 2014 growth (4.9 per cent).
Digital is slowly rising to take the role of the hero being the driving force behind growth in the advertising economy and is predicted to surpass television as the largest media format in ad revenues by 2017, one year earlier than previously expected. Digital ad sales are expected to increase by 17.2 per cent globally in 2015, while sales on traditional media formats declined by two per cent. Digital formats thus now represent USD 160 billion globally, 32 per cent of total ad sales.
Looking at individual countries, of the 73 countries analysed by MAGNA GLOBAL, 62 experienced ad revenue growth this year and eleven (including Russia, Finland, France, Greece, Peru, Singapore) suffered a decrease. The biggest contributors to the 2015 slowdown are the two BRICs countries affected by severe economic difficulties: Russia (12 per cent decline), and Brazil (4.4 per cent growth). On the other hand, MAGNA increased the 2015 growth estimate for India, China and the US. For 2016, only four markets are expected to remain in the red while 69 (including Russia) will experience some level of growth.
Digital: Mobile format grows, banner ads stagnate
Digital media advertising sales are expected to grow by double-digits again in 2016 (13.5 per cent) driven by mobile advertising (42 per cent), video formats (35 per cent) and social formats (31 per cent) while banner formats sales will stagnate (2 per cent decline) due to ad blocking and the competition of other formats.
Social leads in digital media with a 44 per cent growth in 2015, followed by video 39 per cent, although search (15 per cent growth) and display (3 per cent growth) continue to grow globally. Digital ad sales generated by mobile campaigns or impressions are increasing by 61 per cent in 2015, following the rapid shift of media usage from desktop towards smartphones and tablets, while non-mobile ad sales barely grew (3.7 per cent).
Mobile advertising now accounts for 33 per cent of total digital advertising and will reach 55 per cent by 2018, following the rapid shift in digital media usage and planning strategies. The growth of innovation in mobile formats has led to the advertising spends on the medium rising – as the user experience improves gradually while optimising ad inventory, creating even more attractive placement opportunities for advertisers. Mobile advertising is therefore expanding to represent a third of total digital spend today and this is forecast to grow to two-thirds by 2020.
APAC: China, India grow above expectations
In terms of geographies, Asia-Pacific was the most dynamic region (6.5 per cent growth). In Asia-Pacific, media owner ad revenues increased by an estimated 5.6 per cent in 2015 to USD 146 billion, making APAC the second largest region with 29 per cent of global spend (behind North America but ahead of EMEA). The two Asian BRICs grew above expectations: China at 9.9 per cent, India at 16.3 per cent. Growth in 2016 is expected to be slightly slower (5.2 per cent), as the Chinese economy continues to slow.
Digital media remains the primary driver of advertising growth in APAC. Ad revenues grew by 22.4 per cent to USD 43 billion bringing the digital market share to approximately 29 per cent of total regional ad sales in 2015, a figure that will increase to 32 per cent in 2016. The drivers of digital growth are social media (42.8 per cent in 2015) and video (41.8 per cent growth).
Social and video together now represent nearly 20 per cent of total digital spend, up from just 12 per cent three years ago. Search remains the largest digital media format with slightly over half of total digital budgets, and while growth rates are slowing, it remains a vibrant 23 per cent. Across all digital formats, mobile is the primary driver.
Mobile-centric ad campaigns (71.4 per cent) generated the bulk of regional growth, while desktop-based impressionsare now stagnating (2.8 per cent). Advertising on mobile devices (smartphones, tablets) grew to represent nearly 40 per cent of total digital ad sales in APAC in 2015, and will represent 70 per cent of budgets by 2020. Digital is expected to remain strong in 2016 with nearly 16 per cent growth year-over-year.
China is the largest APAC market and ad grew by +9.9 per cent to just over USD 50 billion this year, slightly above MAGNA’s mid-year expectations. It is now comfortably the second largest global market behind only the US. Australia is one of the most advanced advertising economies, with ad spend per capita just under USD 500, one of the highest figures globally. In addition, digital spend represents nearly 40 per cent of total ad budgets. Unlike the US, where digital has not yet passed television as the largest ad spend format, in Australia digital became the largest part of ad budgets in 2013.
As China is slowing down (slightly), India has become the most dynamic economy among BRICs and among all the large nations monitored by MAGNA. Advertising spending in the country grew by +16.3 per cent in 2015 to 487 billion rupees (approx. USD 8 billion) allowing India to become the twelfth biggest ad market in the world at the expense of Russia.
Japan’s advertising revenues growth slowed down this year to just 1.6 per cent to JPY 4,400 billion (approx. USD 41 billion) due to the economic slowdown and lower inflation than expected. Elsewhere in APAC, the fastest ad growth of 2015 was seen in the Philippines (17.9 per cent) while the ‘dragon’ economies registered little or no growth: Singapore (1.6 per cent decline), Malaysia (1.0 per cent), Taiwan (1.1 per cent) and South Korea (1.1 per cent).
Growth in digital is highest in Indonesia (74 per cent) and India (49 per cent). The weakest digital growth is seen in mature markets such as Korea (6.8 per cent), Japan (10.9 per cent) and Australia (13.1 per cent). Mobile share continues to increase and even the APAC market with the least mobile penetration in 2015 (Vietnam: 18 per cent) sees nearly one-fifth of digital budgets shifting to mobile platforms. Hong Kong, on the other hand, sees nearly half of all digital spend (48 per cent) going to advertise on mobile devices.
Globally in terms of different mediums, the +3.2 per cent growth in 2015 was the results of digital media ad sales growing +17.2 per cent to USD 160 billion while traditional media ad sales were down -2.2 per cent to USD 393 billion. Television (USD 193 billion) and radio (USD 32 billion) were flat. Print ad revenues were once again heavily down (newspaper -8.6 per cent to USD 61 billion, magazines -10.1 per cent to USD 25 billion.). Out-of-home grew by +2.6 per cent to USD 30 billion driven by digital OOH (+17 per cent). Cinema ad sales grew nine per cent to USD 3 billion benefitting from improved measurement and trading mechanisms in several markets (e.g. US) as well as an exceptional list of movie releases.
Vincent Letang, EVP, Director of Global Forecasting at MAGNA GLOBAL said, “Traditional linear TV advertising stopped growing in 2015 for the first time outside a recession year. New generations increasingly rely on online VOD (sometimes ad-funded, sometimes premium ad-free) for video entertainment, while advertisers are keen to embrace new digital formats (video, social). Both supply and demand for linear TV impression are therefore decreasing, leading to little or no spending growth outside even-numbered years over the next five years. As a result digital media ad sales will become the number one contributor to global ad sales as early as 2017.”