Zenith Advertising Expenditure Forecasts 2018: Advertisers invest more in digital, Oz ad spend to rise

• Global advertising confidence rising rapidly, 4.6% growth forecast for 2018

Amid growing industry speculation about cuts to digital advertising budgets, Zenith has found no evidence that advertisers as a whole are shifting budgets away from online advertising – in fact, its share of global advertising expenditure continues to rise rapidly. Zenith forecasts that advertisers will spend 40.2% of their budgets on online advertising this year, up from 37.6% in 2017, according to the Zenith Advertising Expenditure Forecasts report for 2018.

This growth in spend is part of the wider process of digital transformation, as advertisers invest in technology, data and innovation to revolutionise their relationships with consumers.

In Australia, total ad spend is forecast to rise by 2.6% to $16 billion this year. The rise can be attributed to the strong online classifieds sector and marginal growth in metro TV in the last quarter of 2017.

“We are observing sustained ROI from digital transformation,” said Vittorio Bonori, Zenith’s global brand president. “And we are now at the forefront of a transformation as brands shift budgets along the consumer journey, benefit from powerful algorithms and advanced machine learning techniques, and invest in new e-commerce solutions. This transformation is at the heart of driving brand growth.”

New research from Zenith demonstrates the value of investing in transformational digital marketing. Zenith created a standard index of brand growth, comparing results from prominent studies and matching brand performance with a series of communications and media benchmarks. Initial findings indicate that the fastest growing brands within categories such as communications, financial services and automotive tend to perform strongly on measures such as share of category search and website traffic, along with effective content marketing and strong performance in earned digital media.

Zenith has also seen clear correlations between brands with high capabilities in marketing and media, and categories in which digital channels have high influence on the consumer journey. This suggests a positive reinforcement between the recognition of the digitisation of consumer behaviour and the positive transformation of marketing organisations.

Globally, advertisers continue to increase the share of their budgets allocated to paid digital channels. According to the March 2018 edition of Zenith’s Advertising Expenditure Forecasts, published today, online advertising grew by 13.7% in 2017 to US$204bn. It accounted for 37.6% of global advertising expenditure in 2017, up from 34.3% in 2016.

This year Zenith expects online advertising’s market share to exceed 40% globally for the first time, reaching 40.2%. In 2017 online advertising already accounted for more than 55% of ad spend in three markets (China, Sweden and the UK), so there is plenty of potential for further growth. By 2020 Zenith expects online advertising to account for 44.6% of global ad spend.

Biggest upgrade in global ad spend forecasts for seven years

Confidence in the global ad market is currently improving rapidly. In December Zenith forecast that global ad spend would rise by 4.1% in 2018, towards the bottom of the 4%-5% annual growth range that the market has maintained since 2011. Zenith now expects the market to rise by 4.6% this year, thanks in particular to improved economic growth in China and Argentina. A 0.5 percentage point revision to the forecasts is unusual – the last time Zenith revised them upwards by so much was back in March 2011.

“In Australia, our ad spend growth is slower and fuelled by strong online classifieds and some marginal growth in metro TV during the pre-Christmas retail period. In addition, digital and out-of-home continue to enjoy growth ahead of the market. However, the rate of growth of digital out-of-home is to starting to slow,” Zenith Australia CEO, Nickie Scriven, said.

“Among advertisers, automotive and retail continue to drive growth, while government and food/produce/dairy have had the largest declines in volume.”

Zenith’s global forecasts for 2019 and 2020 are also above the forecasts it made three months ago, though not by so much. Zenith forecasts 4.4% growth in 2019 and 4.3% growth in 2020, both forecasts being up by 0.2 percentage points.

“The global ad market grew by 4.0% last year,” said Jonathan Barnard, Zenith’s Head of Forecasting and Director of Global Intelligence. “After a jump in confidence, we now expect it to grow substantially faster this year, boosted by the Winter Olympics, football World Cup and US midterm elections.”

Photo: Zenith Australia CEO Nickie Scriven

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