What’s behind the growth in global advertising expenditure?
Carat’s global digital officer, Anthony Rhind, looks at the predicted 5% growth in international ad spend, and discusses some of the major factors behind the figures.
Our industry’s recovery from the global recession has been, on the whole, patchy, with some markets bouncing back faster than others.
However, with new Carat research predicting 5.0% growth in global advertising spends in both 2014 and 2015, we may all now be well and truly emerging from the maelstrom. Advertising momentum is building, with the pace of growth expected to pick up this year compared to 2013. We’ve even nudged ahead of our March prediction, when we thought 2014 spends would increase by 4.8% globally.
Although some regions will grow less quickly than previously thought, this is more than balanced by the fact that North American advertising expenditure is set to exceed the 2007 pre-recession peak by the end of the year. 2015 will see all major markets, including Western Europe, post positive figures.
So what’s been driving this global growth? It’s partly down to a year of big events: the FIFA World Cup, the Sochi Winter Olympics and major elections in the US, Brazil and India. It’s also clear that there’s one medium outperforming all others: ‘Digital’.
Digital media is expected to top previous predictions for 2014, with global growth expected to reach 16.1%. In fact, we’re expecting to see double-digit growth in all major markets both this year and next.
It will also increase its total share of spend, reaching 20.5% in 2014 and 22.6% next year, when it will outpace the combined print global share for the first time.
This explosion in growth has been driven by a number of factors. Mobile (including tablet) advertising was initially slow to take off, but has now become a very significant part of digital spend, largely as a result of Google and Facebook who collectively account for an estimated 70% of all global Mobile spend.
Advertising remains the way that social networks are funded, at least in the West – for example, Facebook now makes the majority of its ad revenue from Mobile. As people grow ever more attached to their smartphones, I see ad spends only going in one direction.
Finally, the lingering after-effects of the recession mean that digital is a more attractive proposition than ever before. Although consumer spending is returning to pre-2007 levels, their confidence has not and they are increasingly mistrustful of institutions and corporations.
Marketers around the globe have realised that digital gives them greater flexibility and accountability to clients and consumers alike, further fuelling the medium’s growth.
Turning to look in more detail at the UK, many of these global trends are reflected in our own domestic market, which is expected to increase by 7.5% this year – up considerably from the 5.0% we predicted back in March.
The wider economy has continued to improve, TV was given a significant boost by the World Cup, and digital is expected to increase by 17.5%. This means digital will then account for 42% of all ad spend in the UK – 20% more than the global figure.
Of course, it’s not all good news for every medium – for example, print revenues are expected to continue its slow, steady decline. However, even here there is room for optimism. In the UK the freesheet market is flourishing, as demonstrated by the Evening Standard increasing its distribution in order to replicate the reach of ESI-owned London Live.
Newsbrands are better at delivering their content to different devices where people are consuming the content in different mindsets. Additionally, and in many cases, this content is now free, meaning that credible and curated content from newsbrands is able to compete more powerfully against the plethora of other free news organisations.
As a whole, demand for freesheet content remains high, and being immune to circulation falls has helped them strengthen their position.
Overall, it is a very optimistic outlook that should have media businesses and clients alike looking forward to a strong, productive and effective 2015.