Courtesy its dynamic nature, digital media will continue its double-digit growth in 2013. Global digital ad revenues will increase by 13.4 per cent to be at USD 113.6 billion. Growth will be driven by search (14.6 per cent to USD 52 billion), video (21 per cent to USD 6.6 billion), mobile formats (54 per cent to USD 12 billion) and social formats (39.6 per cent to USD 8.2 billion). Other formats will barely grow, and actually decline in many markets due to the commoditisation and deflation of display inventory.
In its latest forecast reports, Magna Global report states that the global advertising market will grow by 3 per cent this year to USD 486 billion, thus slowing down from 2012 (3.9 per cent), and then accelerate by 6.1 per cent in 2014, to USD 515 billion. Compared to Magna’s previous forecasts, published in December 2012, this represents a small downgrade for 2013 (by 0.1%) and a small increase for 2014 (0.1%).
The predicted acceleration in ad revenues is in line with expectations of accelerated economic growth in the second half of 2013 and throughout 2014. In its April 2013 report, the IMF predicted 2013 real GDP growth to reach 3.3 per cent globally and 2014 to accelerate to 4.0 per cent in 2014. Although the economic forecast is still modest for developed markets (1.2 per cent and then 2.2 per cent) and for Europe in particular (0 per cent and then 1.3 per cent), it will in many cases bring the economic environment to the point where business growth triggers not only ad spend growth but, in some markets, faster-than-GDP growth. In markets where marketers have been cautious, they may at last switch from optimisation mode to expansion mode.
Television advertising growth will slow down in 2013 due to the absence of global televised events. Following a 5.0 per cent growth in 2012, ad sales will grow by only 2.0 per cent to USD 196.5 billion, but TV remains the leading media category (40 per cent market share) ahead of digital. Print formats continue their decline: in 2013 newspaper ad revenues will decline by 3.3 per cent and magazine revenues by 5.1 per cent to a combined USD 110 billion (a 23 per cent market share). Radio advertising will grow by 1.1 per cent to USD 32.5 billion and out-of-home media revenues will increase by 2.9 per cent to USD 32.6 billion.
China and Japan – the year of growth stories
There continues to be wide regional and national contrasts in the global advertising landscape in 2013. There will be almost no growth this year in EMEA (0.4 per cent) and North America (0.7 per cent). On the other hand, the ad forecast for APAC increases by 5.9 per cent and by 12.5 per cent for Latin America.
The Chinese economy successfully engineered a ‘soft landing’ in 2012, with real GDP growing by 7.8 per cent compared to 9.3 per cent in the previous year (source IMF) and inflation coming under control (it was 1.8 per cent in 2012 following 7.8 per cent in 2011). The Chinese government can afford to continue stimulus programs and maintain high-single-digit real GDP growth rates in the mid-term. In its April report, the IMF forecast 8 per cent of real GDP growth this year and 8.2 per cent next year. When factoring inflation, that translates into low-double-digit nominal GDP growth for the next five years.
Advertising spend had its own soft landing last year; it increased by 9.3 per cent, which was the first time it grew at a slower pace than nominal GDP. In the mid-term however, Magna Global believes the ad market still has the potential to grow faster than the economy because domestic and international brands are competing for the attention of Chinese consumers while media inventory is limited, therefore driving media cost inflation.
Another ‘sleeping giant’ waking up in Asia is Japan. Following the general elections of December 2012, Shinzo Abe from the Liberal Democratic Party became the new Prime Minister. Prime Minister Abe introduced an aggressive unorthodox, expansionist economic policy – that has become known as ‘Abenomics’ – to break the pattern of deflation/stagnation that has plagued Japan in the last 15 years. In April, the IMF raised its real GDP growth forecast to 1.6 per cent for 2013 (0.4 per cent) and to 1.4 per cent for 2014 (0.7). The IMF is acknowledging a shift in the Japanese economy: after 10 years of deflation, CPI inflation is expected to be flat in 2013 (0.1 per cent) and up by 3.0 per cent in 2014, which, by Japanese standards, sounds like hyperinflation. The ad revenue growth forecast has been hence revised from 0.2 per cent to 1.5 per cent in 2013.
Trends impacting digital media
Two major trends will affect digital media advertising in the year ahead — the rise of programmatic buying and social media.
Programmatic buying is a method of buying and selling digital display inventory through automated, data-driven platforms and, sometimes, through real-time bidding (RTB). It fundamentally allows the demand side to buy audience for online display and video formats as they buy key-word search. Programmatic transactions continue to grow in the US, commanding an increasingly large share of display advertising revenues. In 2012, programmatic transactions represented $2.4 billion i.e. 17.4% of total display advertising, and we expect this to increase to 48% of revenues by 2017. Internationally, most markets still lag the US at this point, but some less advanced digital markets may face smaller legacy issues and resistance to change in the value and therefore evolve more rapidly towards automation. Some Western Europe are showing robust RTB growth such as the Netherlands where 29% of digital ad sales are already transacted via programmatic methods. Expansion in APAC and South America is still in more nascent stages.
For the first time, Magna Global is publishing estimates and forecasts on the size of social media within internet advertising revenues. Vincent Letang, Director of Global forecasting and author of the report, said in a prepared statement: “In recent years, social media has become a central part of the online experience, partly at the expense of portals and emailing. Everywhere, internet users already spend 25-30 per cent of their online time on social networks. Facebook is the leader with 1.1 billion users to-date, but other forms of social internet are flourishing, notably in Asia or Russia, and monetisation is accelerating in 2013”.
Global social advertising revenues are estimated USD 5.9 billion in 2012, growing 36.8 per cent compared to 2011. Social media advertising is expected to increase further from USD 8.2 billion in 2013 to USD 24.3 in 2018, representing a 24 per cent CAGR in the next five years.
2014: strongest growth since 2010
For 2014, Magna Global predicts global advertising revenues to grow by 6.1 per cent to USD 515 billion, which is a slight acceleration compared to its December forecast (6 per cent). This will be the highest annual growth since 2010, when the global advertising market grew by 8.2 per cent, having rebounded from the worst recession year on record, 2009 (11 per cent).
The global ad market will be driven by a stronger economy (4 per cent of real GDP growth according to the IMF), aggressive economic policy in China and Japan and stabilisation in Western Europe.
In addition, ad spends will be driven by the even-year events: Soccer World Cup in Brazil (with soccer becoming increasingly popular in markets like Japan, China and the US), Winter Olympics in Sochi, Russia, and the mid-term election cycle in the US. Since the ‘Citizen United’ decision of the Supreme Court that removed any limitation to fund-raising and campaign spending, ad spend around mid-term congressional elections and ‘propositions’ has become almost as big as a presidential race year.
For 2014, according to Magna Global, APAC will grow by 7.4 per cent and Latin America by 12.9 per cent. Magna Global has also increased its 2014 forecast for North America from 5.1 per cent to 5.6 per cent (US: from 5.4 per cent to 5.9 per cent) and its forecast for EMEA from 3.2 per cent to 3.3 per cent.
The next Magna Global forecasts will be published in December 2013. Magna’s analysis covers ad market conditions in 73 markets, adding three new markets this time – Sri Lanka, Pakistan and Kenya.