New ad market optimismThere is a new optimism in the global ad marketThe great recession – the biggest disruption to the global economy since the Great Depression - is finally overEven the eurozone has returned to (slow) growthAs we discussed in our report on Davos, it’s time to look beyond the economy and focus on the huge structural changes taking place in the global ad market, which are being driven by mobile technologyMobile is the main driver of adspend growth, and is transforming advertising and marketing practices
Adspend drivers all point to growthThere are three main drivers of adspend – the graphics will appear in turn on click:corporate profits, consumer confidence and GDPCompanies will develop new products and extend their brand when they have profits to invest, when economies are becoming more productive, and when consumers are willing to spend more of their incomeAll three drivers now point to mounting adspend growth over the next three years
Profits and cash available for expansionIn the US, corporate profits are at record levels – the chart will animate on clickand at their highest share of the economy since records began in 1947Profits were relatively stable between 1980 and 2003, but then began rising rapidly, recovered from the financial crisis by 2010, and are now higher than everThis is partly because the big US companies are truly global in scope, and are benefiting from the stronger international as well as domesticCompanies around the world have large holdings of cash available to invest in their expansion
Consumer confidence improvingAccording to Nielsen’s Global Survey of Consumer Confidence and Spending Intentions , global consumer confidence has improved steadily over the last two yearsIn this survey, 100 represents neutral confidence, numbers below 100 represent lower confidence, while numbers above 100 represent higher confidenceOn clickConfidence remains relatively weak in Europe, increasing from 71 in Q4 2011 to 73 in Q4 2013, but this should start to lift as the Eurozone recovery gathers paceClickConfidence has remained in the 90s for Latin America andClickMENAClickThere has been a particularly strong recovery in North America, where confidence has risen from 84 in Q4 2011 to 95 in Q4 2013ClickAsia Pacific has remained the most confident region over the last two years, and confidence has cross over the 100 mark from 99 in Q4 2011 to 105 in Q4 2013ClickGlobal confidence has increased from 89 in Q4 2011 to 94 in Q4 2013There is clearly a way to go before consumers are convinced that the economic recovery is here to stay, but the trend is consistent and positive
All regions now growingAll regions have now returned to growth, though the gulf between mature and rising markets remainsThe International Monetary Fund is forecasting positive GDP growth for all regions this yearOn click:Western Europe is, unsurprisingly, the slowest-growing, forecast at +1.2%Click:Forecasts for North America and Central & Eastern Europe are very similar, at +2.6% andClick +2.7% respectivelyClick:Latin America and MENA are stronger, at +3.1% andClick: +3.8%Click:Asia Pacific is the clear leader of global growth, forecast at 5.2% in 2014These are real growth figures, adjusted for inflation – the figures for nominal (unadjusted) GDP growth are even more positive
Advertising to strengthen over next three yearsAdvertising will continue to strengthen over the next three years, with global adspend growth forecast to rise from 3.9% in 2013 to 5.5% in 2014. Growth is then set to increase to 5.8% in 2015 and 6.1% in 2016. This growth will be driven by improvement in the global economy, the spread of programmatic buying, and the rapid rise of mobile advertising.Global adspend will be boosted this year by the three ‘semi-quadrennial’ events – the Winter Olympics, the football World Cup, and the mid-term elections in the US – which will benefit television in particular.Advertisers are also gaining in confidence as growth returns to the Eurozone, which now looks more stable and less likely to deliver more negative shocks to the world economy.Advertisers are in a strong position to invest in expansion, with large reserves of cash and high profitability. We therefore expect growth to increase in each of the three years we forecast.
Three broad regions of adspend growthWe can divide the global ad market into three categories: low growth, steady growth and rapid growth.ClickThe low-growth regions are Western and Central Europe and Japan, which we forecast to grow by between 1% and 3% a year between 2013 and 2016.ClickThe steady growth regions and North America, Middle East & Africa, plus ‘Advanced Asia’ (Australia, New Zealand, Singapore, South Korea and Taiwan). We forecast these regionsto grow at 5%-6% a year.ClickThe rapid-growth regions are Eastern Europe, the rest of Asia and Latin America, which are on track to grow at 9% -12% a year.
BRICs are slowing – future growth driven by youthful marketsThe BRIC markets are slowing – we forecast 10% annual growth between 2013 and 2016, compared to 12% between 2010 and 2013, and 17% in the last decadeIn the future growth will be driven more by the ‘Youthful markets’ – six markets that are large, are growing rapidly, and have a young, vigorous population: Indonesia, Mexico, Philippines, South Africa, South Korea and TurkeyWe forecast the Youthful markets to grow at 13% a year between 2013 and 2016While the Youthful markets currently account for only 6% of global adspend, we expect them to contribute 16% of all the ad dollars added to the global market over this period. They will provide the next wave of rapid adspend growth as the BRICs continue to slow.
More new ad dollars from mobile than any other mediumMobile is now the main driver of global adspend growth. We forecast mobile to contribute 35% of all the extra adspend between 2013 and 2016. Television is the second largest contributor (accounting for 34% of new ad expenditure), followed by desktop internet (27%).Mobile advertising has now truly taken off and is growing six times faster than desktop internet. We forecast mobile advertising to grow by an average of 50% a year between 2013 and 2016, driven by the rapid adoption of smartphones and tablets. By contrast we forecast desktop internet advertising to grow at an average of 8% a year.We estimate global expenditure on mobile advertising was US$13.4bn in 2013, representing 12.9% of internet expenditure and 2.7% of advertising across all media. By 2016 we forecast this total to rise to US$45.0bn, which will be 28.0% of internet expenditure and 7.6% of all expenditure. This means mobile will leapfrog radio, magazines and outdoor to become the world’s fourth-largest medium by the end of our forecast period.
Mobile is transforming all forms of internet advertisingThe traditional categories of internet advertising are adapting to the new mobile environmentClickThe proliferation of devices and screen sizes mean that it is becoming impossible to tailor ads for specific platforms, so ads have to be able to respond automatically to size of the device they are displayed on. This is blurring the distinction between mobile and desktop displayClickThe convenience of mobile search is expanding the number of searches, creating new search behaviour (e.g. searching for the best price for a product while examining it at a physical store), and adds new interaction options (such as click to call)ClickThe transition to mobile will make programmatic targeting even more personal. The relationship between a smartphone and its user is much more intimate than for any other device – most people have their phones at arms reach through day and night.
Mobile is rapidly becoming central to video viewing and social sharingMobile is changing the whole practice of marketing, not just paid advertisingLarger screen sizes and faster connections are making smartphones a better platform for consuming media contentIn December 2013 mobiles and tablets accounted for 26% of video viewing, up from 8% a year earlier.Smartphones are now the most important platform for social media, so they are a key route for media distribution through social sharingEight social media sites accounted for 23% of the traffic to 200,000 key websites in Q4 2013; 15% came from Facebook More than half of all Facebook referrals were mobile in January 2014 Brands creating owned content must start thinking mobile first
Developing markets leapfrogging desktop to go straight to mobileSmartphones are less common in developing markets than in the developed world, but their popularity is growing quickly and they have already overtaken fixed-line broadbandDeveloping markets have leapfrogged the desktop internet and are becoming mobile-first marketsThere are 20 mobile broadband subscriptions per 100 people in emerging markets, compared to 75 in developed marketsBut mobile broadband is a lot more common than fixed-line broadband (6 subscriptions per person) in emerging markets Developing markets are now leading the growth in smartphone sales: sales were up 50% in Q4 2013 across Latin America, the Middle East and Africa, Asia/Pacific and Eastern Europe. The fastest-growing country is India, where smartphone sales were up 167% in Q4, and Latin America is the fastest-growing region, with sales up 96%
Handsets to evolve into network of devices, screens, sensors and connectionsZenithOptimedia identified the ‘mobile consumer’ as one of six key trends for the next 25 years in its 2038 futures programme. The relationship we have with our mobile devices has changed significantly with the development of smartphones and tablets. They have become deeply rooted in our lives and we now rely on them to organise, curate and control our lives.Over the next few years term mobile will cease to refer simply to handsets; instead it will refer to the ‘mobile consumer’ and the multitude of devices, screens, sensors and connection points around them wherever they goSome of these devices and connections will support recognisable paid advertising, others will require new forms of brand communication
Consumers will live in a world of connected devices, working together through mobile technologyIn this world, where everything is connected, the consumer – or rather people – take centre place, with sensors detecting their every moment, and all types of services and experiences customised for them throughout the day– this is what we discussed in our ‘Mobile of Everything’ reportWe will live in ‘smart cities’ that embrace wireless sensor networks to deliver appropriate data to people, companies and authorities, in order to facilitate efficient management of most aspects for city lifeWe will come to rely on mobile devices to program and be the control point for all aspects of our daily work, communication, shopping, comfort and convenience
Mobile will facilitate every step of the path to purchaseWith the arrival of the Mobile of Everything, our mobile devices will become central to our shopping experience and will be used to be make most, if not all, of our purchases. Imagine entering a store, and being recognised via your mobile handset, which through automatic check-in features enable you to receive bonus points and special promotionsiBeacons already offers smartphone users the opportunity to receive discounts, rewards or contextual suggestion even when their phones are lockedMobile technology will facilitate every step of the path to purchase: search, experience, purchase, 3D printing, delivery and even collection