Global economic recovery brings record ad market growth
- Global advertising spending will grow by $78bn in 2021 (+14%) to $657 billion, a new all-time high, following a decline of -2.5% in 2020. The marketplace will continue to grow in 2022 (+7%).
- Advertising activity is fueled by (1) economic recovery (global GDP +6.4%) benefitting key ad-spending verticals severely hit by COVID-19 last year (automotive, travel, entertainment, restaurants), (2) stronger than-ever organic drivers to digital marketing, and (3) international sports events (Tokyo Olympics, UEFA Euro).
- Digital ad formats capture most of the growth with ad sales up +20% to $419bn, 64% of total ad sales. • Linear ad sales are slower to recover but will stabilize full-year (+3% to $238bn).
- All 70 ad markets monitored will expand again this year with China (+16%) and the UK (+17%) among the largest increases.
- The APAC market will grow by 12.8% to reach $203 billion, with digital ad sales up +19% and linear ad sales up +4.1%.
- China’s strong 2021 performance will result in ~$13 billion of incremental spending in 2021, the second highest globally behind the United States.
APAC AD MARKET
Asia Pacific has been less affected than other regions by the COVID pandemic and economic recession. Still, GDP growth fell by -1% in 2020 compared to typical economic growth of 6% per year over 2016-2019, but that was resilient compared to the global average of -3.3% for GDP last year. GDP will grow by +8.6% in 2021, powered by large markets such as China (+8.4%) and India (+12.5%). This is slightly higher than prior expectations, with overall APAC GDP revised up by +0.6% vs. October’s IMF forecast.
While the rollout of COVID vaccines has not been as aggressive as many Western markets (either due to lack of availability such as India, popular or political reluctant as in Korea or Japan), there were fewer cases, fewer deaths, and fewer shorter shutdowns vs. Western markets. That has not stopped consumers in Asia Pacific from changing their behaviour in the same ways as in heavily COVID-impacted markets: more streaming, more Ecommerce, and more integration of digital platforms into their day-to-day lives. As a result, economic recovery and organic digital growth will power APAC’s total advertising spending to +12.8% in 2021, following 2020’s – 3.3% growth. This will see total advertising budgets in APAC reach $203 billion, significantly ahead of 2019’s $186 billion total.
In 2021, linear advertising ad sales (linear TV, print, radio, OOH) will grow by +4.1% to reach $76 billion. This follows 2020’s dismal -19% performance, however, and results in a 2021 linear ad sales total that is only 84% as large as the pre-COVID 2019 levels. In fact, while linear advertising spending will bounce in 2021 because of the extremely weak growth comparison, linear advertising sales are still in a long-term decline. By 2025, linear advertising sales will represent just 28% of total ad sales in APAC, down from 38% of budgets today. Digital advertising revenues, on the other hand, will charge ahead, growing by +19% this year (to $127bn), following a resilient performance in 2020 (+12%), to reach 63% of total budgets.
Beyond the 2021 rebound, MAGNA expects APAC advertising spending to grow by an average +4.4% annually over 2022-2025, to reach $241 billion in 2025. This will continue to reflect divergent growth trends between linear formats (-2.6% CAGR through 2025), and digital formats (+8% CAGR through 2025).
APAC remains the second largest global advertising region, behind North America but $59 billion ahead of EMEA; while EMEA may close the gap slightly through 2025, APAC’s lead will remain significant overall. APAC markets now account for 31% for the global advertising market place, compared to 27% in 2010.
The APAC advertising market is concentrated around the two largest markets China and Japan, combining to represent 71% of total regional ad spend and ad revenues. This has increased over the past year, as China was one of the few markets to grow in 2020 because of strong digital performance, gaining share vs. the overall regional average which saw spending decline. In 2021, the strongest growth rates will come from China (+16%), the Philippines (+16%), Hong Kong (+15%), and Malaysia (+15%). The weakest performance, on the other hand, will come from Pakistan (+5%), Singapore (+7%), New Zealand (+8%), and Vietnam (+8%). All markets will grow in 2021, however, because even markets facing structural headwinds have an extremely easy growth comparison with 2020.
In APAC (like everywhere else) digital advertising is powering total market growth. Most digital ad formats are booming in 2021: Search (+19%), social media (+24%), and video (+21%) remain the growth engines of APAC digital ad market, while static banner formats show only modest growth (+3%). Mobile digital ad sales continue to be where most growth in consumption and spending lies as mobile ad format spending will grow by +23% this year, following 2020’s tremendous +19% growth. Smartphones and feature phone continue to play a larger role in the digital life of APAC consumers, and the Chinese market is one of the most advanced large mobile digital market globally, in terms of both features and in share of digital spending. Mobile advertising spending represents nearly 80% of total digital spending in APAC in 2021, and will increase to 87% of total digital spending by 2025.
In APAC, like in most global regions, lower funnel direct digital ad formats held up better because of COVID slowdowns compared to upper funnel brand advertising. These trends have continued even after the COVID crisis, as Ecommerce spending becomes even more integral to APAC consumer lives. China was always ahead of Western markets in terms of the total amount of retail spending that was transacted online, and Ecommerce in China got a boost just as it did in most other global markets because of COVID. As a result, Ecommerce sales are now comparable to offline sales and the trend continues to shift away from physical purchases. This will continue to power spending on search and social advertising formats, especially as social commerce is so integrated into daily life in APAC markets. Big online retailers, such as Alibaba, JD.com, Rakuten, and Pinduoduo continue their rapid growth.
Television advertising spending will grow by +4.3% in 2021 to reach $49 billion, bouncing off the 2020 lows of -14.7% growth and $47 billion. This will leave the TV market far short of 2019’s $56 billion total, however. Furthermore, television budgets will represent just 24% of total spending in 2021 in APAC, down from 38% in 2015. Through 2022, TV budgets will shrink by an average of -3.4% annually, meaning that TV spending will never again regain the 2019 totals. In addition, the Olympics in Tokyo were expected to be a supporting factor for brand advertising and television spending in 2020, but their postponement and the controversy around hosting the games in Japan will likely result in a smaller impact. Uncertainty around whether they will take place, the absence of foreign spectators, and potentially some reluctance to be associated with the controversy of the event, will result in some brands choosing to spend elsewhere.
Print ad sales will be flat this year (-0.3%), following 2020’s weak -28% performance, resulting in total print spending that is just 71% of the level of spending in 2019. Print represents such a small portion of total spending, however (just 5% in APAC) that these declines do not have a huge impact on total regional growth. Many verticals or brands that might consider deeper print cuts have already cut print formats entirely from their media plans. Radio ad sales will increase by +1.7% in 2021 to reach $4.6 billion, following a -23% decrease in 2019. Prior to 2019, radio had been growing since the recession of 2008, and COVID has eroded its importance in consumer media experiences. As a result, radio will continue to decline slightly through 2025, shrinking to just under 2% of total budgets. Out of home had been strong in APAC pre-COVID, but not surprisingly, COVID eroded its place in media budgets significantly. OOH spending fell by -22% in 2020, and will bounce by +8% this year, regaining some of the lost spending. This growth will be across both traditional OOH (+7%), and digital OOH formats (+11%). Cinema, however, fell by -67% in APAC in 2020 and will only regain a small fraction of the lost spending (+17%). Mobility has recovered in some markets (Japan, Korea), but in others like India it has significantly fallen because of recent COVID setbacks. This will all slow the pace of recovery for OOH.