NEW YORK: Global advertising spending is forecast to 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%).
Specific to India, the forecast, published by MAGNA, the market-forecasting unit of IPG Mediabrands, indicates that after falling by 22.8% in 2020, net ad revenues will grow by 11% in 2021 and 13.6% in 2022.
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 US market will grow by $34bn (+15%, strongest growth rate in 40 years) to reach $259 billion, with digital ad sales up +20% and non-political linear ad sales up +4%.
Linear ad sales still represent the bulk of ad revenues for traditional media owners and their continued stagnation will trigger a wave of consolidation in the media industry, aimed at competing with digital media players.
According to Vincent Létang, EVP, Global Market Research at MAGNA and author of the report: “As economic recovery is stronger and faster than anticipated in several of the world’s largest ad markets (US, UK and China, in particular) and consumption accelerates, brands need to reconnect with consumers.
“At the same time, the acceleration in ecommerce and digital marketing adoption that started during COVID, continues full speed into 2021, fueling digital advertising spending from consumer brands as well as small and DTC businesses. This unique combination of cyclical, organic and structural drivers will lead to the strongest advertising annual growth ever monitored by MAGNA: +14% globally (+15% in the US).”
GLOBAL AD MARKET: +14% TO $657 BILLION
As the economy recovers faster than expected globally (GDP +6%) and in most markets, so do marketing activity and advertising spending. With the added driver of rescheduled international sports events, MAGNA forecasts global all-media advertising spending to grow by $78bn (+14%) to $657bn in 2021, a new all-time high. MAGNA also raises its forecast for advertising market growth in 2022 to +6.6% (previously +5%). The +14% growth expectation for 2021 would represent the highest growth rate on record, beating +12.5% in 2000, and a significant increase from MAGNA’s previous global forecast (Dec. 2020: +8%).
Economic recovery will lift all boats, but the contrast has never been wider between digital ad sales accelerating (+20% to $419bn) and linear ad sales (linear TV, linear radio, print, OOH, cinema) which are barely stabilizing (+3% to $238bn after 2020’s -18% decline). COVID may be receding in most markets but the changes to lifestyles, media consumption and business models continue to fuel an acceleration in the adoption of digital marketing from both national consumer brands and small, local and “direct” businesses. Digital growth from consumer brands comes partly at the expense of traditional linear channels but in the case of small businesses (that represent the bulk of search and social ad spend), it is mostly incremental to the advertising pie.
All of the 70 ad markets monitored by MAGNA will grow to some degree in 2021 and 2022. In 2021, Asia Pacific ad markets will grow by +13%, EMEA markets by +12%. Latin America and North America will both grow by nearly +15%. Everywhere, the pattern is similar, with linear ad sales to grow by low- to mid-single digits and digital ad sales growing by +20% or more. The United States remains the largest market and will increase by +15% in 2021, and will still remain ahead of China (+16%), Japan (+9%), the United Kingdom (+17%) and Germany (+11%) among the top five markets.
Nearly all digital ad formats will grow by double-digits in 2021 as total digital ad sales will account for 64% of global all-media ad spend. They will reach two-thirds of all advertising sales in 2022. The explosion of ecommerce will boost search by +20% to $200 billion, while growing marketing adoption and media consumption will drive social media by +26% to $119 billion. Video ads will grow by +24% to $57 billion as short-form, long-form AVOD and OTT ad spend are all fueled by increased reach and viewing. Out-stream video and static banners may grow at a more subdued pace (single-digits) due to the increasing limitations to tracking and targeting on websites (on Safari and soon Chrome) and apps (on iOS14).
Among linear ad formats, MAGNA expects linear television ad sales to recover as consumer brands (e.g. automotive, drinks) compete for returning consumers in a brand-safe environment. Advertiser demand will drive CPM inflation (average +8%) which offsets eroding ratings. In addition, international sports events bring additional ad budgets: Global TV ad sales will thus grow by +3% to $153 billion. Radio and out-of-home media will benefit from businesses re-opening in several key verticals (e.g. automotive, retail, entertainment) as well as a gradual return to consumer mobility that will restore their audiences; ad sales will increase by +5% and +10% respectively. Print ad sales will not quite stabilize as the return of key verticals (fashion, beauty, travel) will not offset the continued decline in circulation and ad pages. Newspaper and magazine ad sales will decrease by -4% and -5% respectively.
The scale reached by digital media owners and the stagnation of linear ad spend is forcing traditional media owners to consolidate to compete more effectively and invest in cross-media technology. MAGNA believes the spring announcements in the US (Warner/Discovery) and in France (TF1/M6 with a combined market share of 85%) are just the beginning of a new wave of mergers and acquisitions globally.
Meanwhile, MAGNA believes the recent merger announcement between Warner Media and Discovery is the first of a new wave of consolidations to come in the media industry. Facing stagnation in linear media consumption and linear ad sales that are still the bulk of their business revenues, traditional media companies have no choice but to grow in scale, in order to compete with digital media giants, and invest in cross-platform advertising solutions.
Traditional media owners are moving now as they believe antitrust authorities are ready to consider market shares in the broader media market and thus approve horizontal consolidations that would have been unthinkable just five years ago.
