Global Advertising Market
to Grow by +5% This Year

Latest MAGNA report forecasts advertising revenues to grow for the tenth consecutive year in 2019 to reach $600BN –
Linear advertising sales will shrink by -3% while digital ad sales will grow by +14% – In the US, digital growth has started to slow down in the first months of 2019, having reached a 52% market share at the end of last year.

Contact: scott.berwitz@mbww.com, Vincent.letang@magnaglobal.com

TOP STORIES

  • In its latest report on global advertising market trends, released June 17, 2019, MAGNA predicts that media owners advertising revenues will grow by +5% in 2019 to approach $600 billion
  • MAGNA increases its forecast for 2019 growth, from +4.7% in December 2018 to +5.0% today following the stronger-the-expected advertising activity in the first half of 2019 in several key markets, including US and China.
  • As expected, global market growth is slowing down compared to the record growth recorded in 2018 (+8%), mostly due to the lack of major cyclical events (US elections, FIFA World Cup) in 2019. Neutralizing cyclical events in both years, global growth would be +7% last year, to +6% this year.
  • 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 $366bn 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 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% ($304bn).
  • Ad spend will grow in all key markets this year: US +3% (excluding cyclical: +5%), China +10%, Russia +10%, India +15%, UK +7%).
  • Television ad revenues will shrink by -2% this year while print ad sales will decline by -10% and radio by -1%. OOH will continue to outperform traditional media: +5%. Social media will be the fastest-growing digital format in 2019 (+23%) ahead of video (+22%), and search (+13%).
  • Global advertising spend has now been growing for ten consecutive years (2010-2019) and MAGNA forecasts more growth in 2020 (linear -0.6%, digital +11%, total +5.4%)
  • In the US, advertising sales will grow by +3% this year to reach an all-time high of $220 billion. Digital ad sales will grow by +13% year to $126 billion milestone (57% of total ad sales), while linear ad sales will suffer from the high 2018 comps and lack of major events (-8%). Presidential elections will help ad revenue to re-accelerate in 2020 (linear flat, digital +10%, total +6%).

 

According to Vincent Létang, EVP, Global Market Intelligence at MAGNA, and author of the report:

 “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. However 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.

This is an Executive Summary from the Fall Update of MAGNA’s Global Advertising Forecasts. Next update (US and Global): June 2019. MAGNA’s market research publications include dozens of reports on advertising spend, advertising costs, advertising revenues, media consumption, and advertising technology (programmatic), analyzing and predicting ad market trends in the US and 70 countries. To access full reports and datasets (subscribers only) contact Vincent.letang@magnaglobal.com.

15 GLOBAL FINDINGS

  1. Net media owners advertising revenues (NAR) will grow by +5% in 2010, to reach almost $600 billion ($595 bn). MAGNA’s raises its forecast (vs +4.7% published in the previous report of December 2018) due to stronger-than-expected market performance in the first half of 2019 in several key markets (US, China).
  2. 2019 will be the tenth consecutive year of growth for global advertising. Following the recession of 2008-2009 (-12%), the market grew by an average +5.5% per year over 2010-2018, growing by +60% overall through that period.
  3. Traditional linear advertising sales (broadcast TV and radio, newspaper and magazine ad pages, out-of-home), will decrease by -3% to $290bn while digital advertising sales will continue to grow double-digits, although it will mature compared to 2018: +14% this year compared to +19% last year. Digital ad sales will represent more than half of global ad sales for the first time this year: 51% ($304bn).
  4. MAGNA is also tracking the total advertising revenues of “editorial media”: that includes the linear advertising sales of all traditional media brands (TV, publishing, radio, OOH) plus the digital advertising sales of the same publishers and internet players in an editorial environment (online and mobile display: banners and videos). Thus defined, editorial advertising revenues grew by +2% in 2018 to $367bn, while non-editorial, “direct” ad formats (search, social) grew by +21% to $200bn. In 2019, the lack of major cyclical events will affect editorial formats more than direct formats and we expect editorial media to decline to decrease slightly (-0.4%) while direct media ad sales will continue to grow by double digits again (+15%).
  5. Global advertising demand will remain strong in countries enjoying a robust economic environment: USA +3% (+5% excluding cyclical events), China +10%, Russia +10%, India +15%. Asia Pacific and Latin America will be the fastest growing regions in 2019 (+7.4% and +7.3% respectively) while EMEA will slow down from +6.1% last year to +4.8% this year amidst economic slow-down and political uncertainty in many European markets.
  6. All but one of the 70 markets analyzed by MAGNA will show some level of growth in 2019. The fastest-growing markets will be Argentina and the Ukraine (both +22%) where ad spend is driven by hyper-inflation. Many other emerging markets will grow around double-digits or more: India (+15%), Egypt (+19%), Vietnam (+11%) and Brazil (+9%).
  7. Digital advertising revenues will grow by +14% this year, to reach $304 billion, representing more than half of the total global advertising economy for the first time (51%). While the growth rate this year will be noticeably slower than the pace MAGNA observed in the last four years (18% to 20%), the dollar growth (+$37bn) will be similar to the record growth recorded in 2018 (+$43bn). In 2020, digital advertising will grow by double digits again (+11%) to reach $338bn (+$34bn – 54% of total advertising budgets).
  8. The slowdown and maturing in digital advertising growth had been expected by MAGNA as digital media penetration is now near universal in many markets. Both usage volume and pricing (average revenue per search click, average revenue per social media user), have slowed down noticeably in the first quarter of 2019, based on the reports published by Google and Facebook. But again, growth remains strong for now. MAGNA anticipates search ad sales to grow by +13% this year, while social ad sales will grow by +23% and digital video by +22%.
  9. The bulk of digital advertising growth will come from ad impressions and clicks on mobile devices (mostly smartphones). Mobile ad sales grew by +24% in 2018 this year, to account for 68% of total digital advertising while desktop-based ad revenues will shrink (-3%), due to declining usage and ad blocking.
  10. Linear television ad revenues will decrease by -2% to $175 billion, due to the lack of major cyclical events (2018: Winter Olympics, FIFA World Cup and US mid-term elections). There will be some international sports events (Women’s World Cup in France, Rugby World Cup in Japan, Cricket World Cup in England and Wales, Copa America in Brazil) and large scale elections (India) in 2019 too but these events will barely move the needle in most markets (except Brazil and India) and not at all in the US.
  11. Excluding the US, linear TV ad revenues will actually increase slightly in 2019 (+1%) as they did in 2018. Television continues to benefit from strong demand from traditional verticals sensitive to brand safety (CPG, pharma, automotive outside the US) 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 also benefits from an increasing volume of campaigns from “Direct-to-consumer” 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). In some markets (incl. France and the US), non-traditional television advertising sales against TV programs (e.g. online or over-the-top ad-funded VOD) 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).
  12. Other traditional media categories will struggle to various degrees in 2019. Print NAR will decrease by -10% to $51 billion and radio ad sales will shrink by -1% to $29 billion. 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.
  13. The only traditional media category to show significant growth in 2019 will, again, be Out-Of-Home. Global OOH NAR is forecast to grow by +4.7% to $3 billion (excluding cinema). The main driver remains the organic growth generated by digital OOH inventory in premium, high-yield locations and “placed-based” environments. DOOH NAR will expand by +17% this year this year to reach $7 billion (22% of total OOH ad revenues).
  14. The largest advertising verticals globally remain retail, automotive, finance, personal care and technology. MAGNA expects technology, telecoms travel, finance, personal care to expand advertising spending in 2019 while retail and automotive will be flat or down in several markets.
  15. For 2020, MAGNA forecasts global advertising to grow for the eleventh consecutive year. Linear ad revenues will stabilize (-0.6% to $286bn) while digital ad sales will grow by +11%. Total advertising sales will thus accelerate to +5.4% to reach $627 billion (+$32 billion) as the return of even-year major events (Summer Olympics, US Presidential elections, European Football Championship) will offset the predicted economic slowdown.

 

10 US FINDINGS

  1. In the US, media owners net advertising sales (NAR) grew by +3.0% this year to reach $220 billion, an increase of six billion dollars and a new all-time high. Neutralizing the estimated incremental advertising spending generated around cyclical even-year events (in 2018: Winter Olympics, FIFA World Cup, Midterm Elections), 2019’s normalized growth would be +5.1%.
  2. Linear advertising sales will decline by -7% (excl. cyclical -4%) to $94 billion (national TV -3%, local TV -18%, print -15%, radio -3%, OOH +4%) while digital ad sales will grow by +13% (search +14%, social +22%, video +19%, static display -14%, digital audio +7%) to $126 billion.
  3. MAGNA expects advertising growth to re-accelerate in 2020 (+5.8% to $233bn) as the return of even-year events (Summer Olympics, US Presidential elections) will bring a record $6.2bn of incremental advertising revenue (2018: $5.4bn) and thus mitigate the economic slowdown predicted by most macroeconomists.
  4. The advertising market remained strong in the first quarter of 2019, with total advertising sales surging +7.1% (excl. cyclical events) in a stronger-than-expected economic environment. This result marks six straight quarters of advertising growth near or above +7.0% growth, the first time this has happened since 2000. MAGNA forecasts that advertising growth will slow in the coming quarters as economic growth is expected to soften. Real GDP will grow +2.6% for full year 2019, compared to +2.9% in 2018, according to the May 2019 release from the Federal Reserve.
  5. Most industry verticals are expected to increase advertising spend in 2019-2020: Finance, Pharma, Food & Beverage and Technology in particular. Only a few verticals are expected to decrease ad spend however: Automotive, Movie Studios, Personal Care and Retail.
  6. The technology sector has been the most dynamic in the last two years and MAGNA believes it will continue in 2019-2020. Intense competition between new internet giants and big old tech brands will rage around smart home products, over-the-top video-on-demand services and cloud services, while the launch of 5G will re-ignite marketing in an otherwise mature wireless sector. “Direct-to-consumer” brands will increase traditional media spend by more than 40%, from a relatively low base. Those brands are particularly attractive to television vendors as they come to the TV market with little leverage and are willing to much higher rates than CPG brands that have been on TV for fifty years and have the scale to negotiate sub-market cost inflation.
  7. National television’s linear advertising sales will decrease by -3% to $41bn in 2019 due to lower spend from some key verticals and the lack of cyclical events. English Language broadcast networks advertising revenues will decrease by -5% in 2019 (-2% excl. CE) and +1% in 2020, (-4% excl. CE). Cable networks advertising revenues will decrease by -2% in 2019 (-1.5% excl. CE) and -0.5% in 2020, (-2% excl. CE).
  8. Despite an all-time high in CPMs ($50 for network primetime adults 18-49), linear television remains attractive for its reach and brand safety, and affordable by the Tech sector. That resilient demand combined with a continuously shrinking supply (ratings down -12 to -15%) fuels CPM inflation that reaches +10% or more and help stabilize revenues. In addition, non-linear advertising sales of television players (Hulu, Full Episode Players) will increase by +22% to $2.6bn (6% of total national TV ad revenues). Total advertising revenues (linear and non-linear) are expected to be flat in 2019 and down -1% in 2020.
  9. Digital advertising sales slowed down in the first quarter of 2019. MAGNA estimates that digital formats grew by +16% year-over-year, a noticeable drop off after six consecutive quarters where growth was consistently between +19% and +22% every quarter. MAGNA has been expecting that slow down as both volume (clicks, active social users) and pricing (revenue per click, revenue per social user) are cooling down following years of very rapid growth. Nevertheless, MAGNA still expects digital advertising to grow by double digits for two more years: +13% in 2019, +10% in 2020.
  10. Linear radio ad revenues are expected to erode by -2.6% to $13bn this year but that will be almost offset by the growth of digital audio advertising sales (+7% to $3bn). Podcasting has graduated from its early portfolio of direct-to-consumer advertisers to attracting an increasingly broad number of brands in various sectors, including CPG. Advertising revenues reached $400m in 2018 (15% of digital audio advertising) and MAGNA expects the format’s revenues to grow by +29% in 2019. That will help stabilize total audio advertising (-1% at $16.2bn).

 

DATA APPENDIX

FIG. 1 – GROWTH FORECAST – KEY MARKETS

Key Regions 2018 2019 2020
World (incl. CE) 8.0% 5.0% 5.4%
North America 9.5% 3.0% 5.7%
Latin America 7.0% 7.3% 6.2%
Western Europe 5.6% 3.9% 3.3%
Central & Eastern Europe 10.0% 8.7% 6.2%
EMEA 6.1% 4.8% 4.2%
APAC 7.8% 7.4% 6.0%
Emerging Markets 10.0% 9.3% 7.3%
Developed Markets 7.3% 3.5% 4.7%
Key Markets 2018 2019 2020
Australia 5.3% 2.5% 3.4%
Brazil 8.5% 9.5% 7.5%
Canada 5.7% 4.1% 3.9%
China 12.0% 10.3% 7.2%
France 6.9% 3.9% 3.6%
Germany 3.0% 2.1% 1.9%
India 14.3% 15.2% 13.1%
Italy 4.4% 2.2% 1.8%
Russia 13.2% 9.9% 6.8%
Spain 6.4% 4.9% 4.4%
United Kingdom 9.5% 6.7% 5.3%

 

 

 

FIG. 2 – GROWTH FORECAST – MEDIA TYPES

Media Categories 2018 2019 2020
TOTAL DIGITAL 19.1% 13.7% 11.2%
Search 19.2% 13.2% 10.1%
Online Video 30.9% 21.9% 18.5%
Social Media 34.2% 23.2% 18.3%
Mobile 36.0% 23.6% 18.3%
TOTAL OFFLINE -4.1% -3.1% -3.3%
Linear TV (incl. CE) 2.2% -2.3% 1.3%
Linear TV (excl. CE) 0.5% 0.5% 0.6%
Print -20.5% -19.3% -18.2%
Radio 0.6% -0.8% -1.3%
Out-of-home 4.9% 4.6% 3.2%
GRAND TOTAL (incl. CE) 8.0% 5.0% 5.4%

 

 

FIG. 3 – US FORECASTS

2018 Size 2019 Growth 2020 Growth
TOTAL OFFLINE (excl. CE) 97,567 -4.1% -4.7%
National TV (incl. CE) 42,709 -3.3% -0.4%
National TV (excl. CE) 41,948 -1.7% -2.6%
Local TV (incl. CE) 22,101 -17.9% 11.8%
Local TV (excl. CE) 18,669 -5.4% -5.1%
Print 15,077 -14.8% -16.3%
Radio 13,492 -2.6% -4.4%
OOH 8,381 3.6% 3.0%
TOTAL DIGITAL (excl. CE) 111,386 13.2% 9.5%
Mobile 74,145 22.0% 16.6%
Desktop 37,241 -4.4% -8.8%
Search 53,568 13.5% 10.3%
Video 13,718 19.7% 14.5%
Social 27,802 24.0% 15.3%
GRAND TOTAL (incl. CE) 213,844 3.0% 5.8%
GRAND TOTAL (excl. CE) 208,954 5.1% 3.4%

 

 

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