Be Warned: The Slowest Ad Growth In Years Is Here

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The latest global forecast from IPG Mediabrands’ “intelligence, investment and innovation” arm, MAGNA, concludes that the world’s ad spend will increase for the eighth consecutive year.


However, the rate of net advertising growth seen worldwide is noticeably smaller than in 2016—marking the slowest growth rate seen since 2014.

And, absent of big-budget political ad spending in the U.S., the trends for 2019 and 2021 point to an even bigger slowdown in growth.

MAGNA forecasts media owners’ net advertising sales to grow by 3.7% on a global scale, to $505 billion, in 2017.

The less-than-4% growth compares to a record 5.9% growth rate seen in 2016.

Why?

“The lack of cyclical events in 2017 (global sports events or U.S. elections), and the U.S. market itself, are in fact contributing the bulk of the global slowdown,” MAGNA concludes. This slowdown was expected by MAGNA, as these two factors contributed approximately one point to 2016 global growth. “Excluding the impact of cyclical events in both years, the underlying slowdown in 2017 will actually be minimal: +4.7% in 2017 versus +4.9% in 2016.”

The 2018 mid-term elections in the U.S. will help fuel global ad growth, as will the Winter Olympics and FIFA World Cup in Russia.

Interestingly, the bulk of global ad growth is being seen in Central & Eastern Europe (+7.2%), and Latin America (+5.9%).

The slowdown versus 2016 is mostly concentrated in North America (+1.7%, versus +7% in 2016).

BAD NEWS FOR BROADCAST TV

Here’s something the broadcast TV C-Suite may wish to digest well after dinner: Digital media has now surpassed linear television to become the No.1 category in advertising revenues.

Within digital, the majority of advertising sales (54%) is now generated by impressions and clicks on mobile devices.

“After a positive performance in 2016 (+3.3%) linear television advertising sales will decrease this year by almost 1% due to the lack of sports events and the erosion of viewing and ratings, despite CPM inflation,” MAGNA says.

It’s the first drop for TV ad sales seen on a global level since 2009.

A steep drop in U.S. advertising sales is the root cause.

Domestic ad sales will grow by 1.6%, to $185 billion.  That’s in line with previous expectations, following a record performance (+7.7%) last year.  But, it is still a hard pill to swallow for TV industry sales executives and top management.

Excluding sporting and political cyclical events, 2017 growth would be “a robust 3.4%,” compared to a six-year-high of +5.9% last year.

 

TV, RADIO STRENGTH IS ONLINE

While TV is seeing ad growth slowdowns not seen in nine years, online advertising sales will grow by 14% this year. On the flip side, offline ad sales (television, print, radio, out-of-home) will decrease by 2%. In 2016, it was flat.

Online advertising will climb to $204 billion to become the No. 1 category globally, with 40% of total ad sales vs 36% for television.

Vincent Létang, EVP/Global Market Intelligence at MAGNA, commented, “The record level of growth in 2016 globally, outperforming economic growth, was caused by marketers willing to embrace the new opportunities offered by digital media (search, social, video, programmatic) on a larger scale, while anxious to preserve their share of voice on traditional linear television, despite rising CPMs costs. In 2017, both digital and offline growth will slow down. Online advertising sales will nevertheless continue to grow by double-digits in most markets (globally +13%), but television ad sales will decline (-1%) due to softer price increases, ratings erosion and the lack of global sports events.”