The global advertising economy remains strong and will grow by 5% this year.
However, ad spend growth in North America will trail that of Latin America, Europe and Asia/Pacific — entirely due to a lack of political dollars.
That’s not a surprise. What could be surprising for some is the slowdown in U.S. digital growth already seen in 2019.
The summer 2019 update of MAGNA‘s advertising forecasts shows that advertising revenue is expected to grow for the 10th consecutive year in 2019, reaching $600 billion.
The first key takeaway: Digital, even on a digital level, is propelling this growth.
On a global level, linear advertising sales will shrink by 3% as digital ad sales will accelerate by 14%.
The second big takeaway: Digital is very much driving growth in the U.S. But, digital growth has started to slow down in the first months of 2019, having reached a 52% market share at the end of 2018.
North American ad spend growth is forecast at 3%. This compares to 7.3% for Latin America, 4.8% for Europe, and 7.4% for Asia/Pacific — even with political and economic uncertainty in these regions.
Furthermore, the U.S. is still the No. 2 global contributor behind China in incremental ad spending, representing some $6.4 billion annually (compared to $7.9 billion for China and $1.8 billion for the No. 3 nation, the United Kingdom).
In fact, the U.S. and China alone represent half of all global growth.
And, worldwide, the majority of ad budgets will be in digital formats, claiming 51% share, MAGNA notes.
What forms of digital media are growing faster than others, on a global scale?
To little surprise, all are growing — but social media is in the clear lead.
While a slowdown in digital growth in the U.S. is making headlines and grabbing attention, it is having very little impact on any slowdown in ad dollar growth.
In fact, on a global level, MAGNA increased its forecast for 2019 growth, from 4.7% in December 2018 to 5.0% today. Why? It pointed to “stronger-than-expected advertising activity in the first half of 2019 in several key markets, including the U.S. and China.”
However, the lack of major cyclical events is playing its part in creating a hazy worldwide outlook for ad dollar growth. MAGNA notes:
- The lack of major cyclical events will affect editorial media types (TV, print, radio, out-of-home, digital display, banners and video) that traditionally benefit the most from those. Editorial ad revenues will stagnate at $366 billion this year, while direct digital ad sales, including search and social formats, will grow by 15%.
- Digital advertising sales (editorial and direct) will continue to grow by double-digits, although it will mature compared to 2018: 14% this year compared to 19% last year. Traditional linear ad sales will decrease by 3%. Digital ad sales will represent more than half of global ad sales for the first time this year: 51% ($304 billion).
TRADITIONAL MEDIA TROUBLES
For readers, a look at how radio and TV stand against digital is perhaps the biggest concern.
The short answer: It’s not good.
Television ad revenues will shrink by 2% this year on a global scale, to $175 billion, while print ad sales will decline by 10% and radio by 1%.
Further, out-of-home will continue to outperform traditional media, with 5% growth forecast worldwide for 2019.
Vincent Létang, EVP of Global Market Intelligence at MAGNA, and author of the report, notes, “Global ad spend continues to grow as the economy remains strong in key markets but two factors are slowing down the growth rates in 2019: one is cyclical (the lack of major events in 2019, following a record year in 2018) while the other is structural: digital ad formats maturing (from 19% in 2018 to 14% this year) as they now account for more than half to total advertising sales.”
He did note, however, that “product innovation” (smart homes, cloud services, OTT, 5G) and “marketing innovation” (direct-to-consumer brands) will continue to drive ad spend growth this year and next.
D2C can even extend to television: The biggest talking point following the NBCUniversal Upfront Presentation held in mid-May in New York was the creation of a free-to-consumer digital app housing a plethora of NBC programs available on demand, thus providing addressable advertising solutions to hungry marketers.
But, these innovations may not be coming fast enough.
Excluding the U.S., linear TV ad revenue will actually increase slightly in 2019 (1%), as they did in 2018.
As Letang explains, “Television continues to benefit from strong demand from traditional verticals sensitive to brand safety (CPG, pharma, automotive outside the U.S.) and the technology sector ramping up its TV spend. Strong demand combined with shrinking supply (ratings decline pacing between 2% and 10% per year in most markets) triggers high CPM inflation that contributes to stabilizing TV revenues in many markets.”
Television, he continues, also benefits from an increasing volume of campaigns from D2C disruptor brands (Uber, AirBNB, etc.) that used to be digital-only in their marketing approach but have started to campaign on editorial media too (mostly TV, OOH and podcasting).
Still, the U.S. and France, Letang says, are each seeing non-traditional television advertising sales against TV programs (e.g. online or over-the-top ad-funded VOD). This is helping television broadcasters to stabilize total advertising revenues. “These are growing rapidly as consumption develops (+10% to +20%) but from a low base (no more than 5% of total television revenues today),” he says.
TV’s efforts, however, are far more meaningful on a global level than those seen by Radio or Print.
“Although some brands are outperforming, publishers and radio broadcasters have not yet developed their digital sales to the point where their growth would offset the erosion of traditional linear formats,” Letang says.