MAGNA GLOBAL ADVERTISING FORECAST – GLOBAL ADVERTISING MARKET REACHES NEW HEIGHTS, AND EXCEEDS PRE-COVID LEVELS

MAGNA, the centralized IPG Mediabrands resource that develops intelligence, investment and innovation strategies, has released the Dec 2021 Global Advertising Forecast, analyzing and predicting the size and growth of advertising revenues across 70 markets. This report includes spend on television, digital, print, radio and OOH with a forecast of advertising spend from 2021 to 2025.

KEY FINDINGS

1. Globally, media owners’ advertising revenues grew by +22% in 2021 to reach a new all-time high of $710 billion, following a decline of -2.5% in 2020. Advertisers spent an additional $126 billion on top of the 2020 tally. The global marketplace is now 19% larger than pre-COVID levels and will continue to grow steadily in 2022 (+12%).
2. Advertising revenues from traditional advertising formats (TV, radio, OOH, print, cinema) grew by $21 billion (+9%) following a -17% decline in 2020, to reach $268 billion; this puts traditional formats at 90% of the pre-COVID market size (2019).
3. Digital advertising sales (search, social, video, banners, digital audio) increased by $105 billion (+31%) to reach $442 billion; digital formats now represent 62% of total advertising sales worldwide.
4. Advertising growth is fueled by strong economic recovery (global GDP +5.9%) and personal consumption, as expected, but the magnitude of growth rates suggests it is more than just the marketplace catching up post-COVID and organic growth factors are driving the tremendous digital acceleration of 2021.
5. Among those factors are the growth in digital media consumption and the explosion in e-commerce scale and depth, which prompted big brands and – especially – small businesses to increase digital marketing activity and ramp up their use of social and search formats.
6. All major industry verticals increased ad spend this year. Drinks, Entertainment, Retail and Technology were among the most dynamic spenders, while Automotive ad spend stalled after a strong first half, due to the semiconductor shortage reducing production and sales.
7. Ad spend grew in all 70 ad markets monitored by MAGNA and reached double-digits in 68 out of 70. Several of the world’s largest markets posted above-average growth including the US (+25%), the UK (+34%), Brazil (+30%), Canada (+27%) and Australia (+23%), while China (+17%) and India (+14%) experienced below average growth.
8. Looking at 2022, supply chain issues will slow down some verticals, and tail of COVID may still inhibit growth in a small number of markets, but growth factors are strong enough for MAGNA to forecast further growth in advertising spending. Economic growth (global GDP +4.9%) and large-scale vaccination will spur consumer mobility and the recovery of some laggard verticals (Travel, Movies), while digital growth will continue to grow organically, and no less than three cyclical events (Winter Olympics, US Mid-Term elections and FIFA World Cup) will bring billions of incremental marketing budgets.
9. In this environment, the global marketplace will grow by +12% to reach $795 billion. Linear ad format growth will slow down to +4% (still a stronger performance than the pre-COVID trends) while digital ad formats will grow by +17%.
10. The Asia Pacific advertising economy grew by +16.5% in 2021, a significant acceleration from 2020’s COVID-impacted -0.8%. Growth is powered by large markets such as China (+16.7% in 2021, +8.0% expected in 2022), and India (+14.0% in 2021, +14.5% expected in 2022). In 2022, APAC advertising revenues will increase by +11.2% to $235 billion, 25% above the pre-COVID spending level, driven by digital advertising growth (+16.2%).

Vincent Létang, EVP, Global Market Research at MAGNA and author of the report, said: “The global ad market recovered above and beyond the economic recovery in 2021. Mature linear ad formats recovered to 90% of the pre-COVID level, just as the economy did. Digital ad formats, by contrast, grew much faster than expected, driven by multiple organic growth factors. Traditional, brand- and privacy-safe editorial media remain crucial to consumer brands, as showed by the strong demand boosting TV costs in 2021, but marketers are increasingly diversifying into digital formats to optimize reach, mitigate costs, and drive sales more rapidly through e-commerce. On top of that, millions of small, local businesses and “direct” advertisers are investing in digital marketing to develop digital-centric or hybrid business models, to complete a perfect storm for growth.”

GLOBAL AD MARKET: +22% TO $710 BILLION

The global economy has recovered in-line with expectations (GDP +5.9% vs +6.4% expected in April) and, in most markets, so has marketing activity and advertising spending. Growth was particularly strong wherever COVID vaccination was fast and deep and allowed full business re-opening early in the year: US +6.0%, UK +6.8%, France +6.3%. Some other large markets displayed tepid economic recovery by comparison, due to underwhelming vaccination and lingering COVID restrictions and/or a manufacturing sector crippled by supply-chain issues: Japan +2.4%, Germany +3.1%. Throughout the world, consumers spent more money than ever in 2021, using the forced savings they built up in 2020 as soon as restrictions to mobility and shopping were relaxed in the spring or summer. In that environment, national brands and local businesses competed to be the first or the most effective in reconnecting with consumers. Ad spend also benefited from the added driver of rescheduled international sports events (Summer Olympics, UEFA Euro).

Global all-media advertising spending grew by almost +22% to reach a new all-time high of $710 billion. This +22% growth represents the highest growth rate ever recorded by MAGNA, beating +12.5% in 2000 and a significant increase from MAGNA’s previous global forecast (June 2021: +14%). Coming after the COVID lockdowns of 2020, and fueled by the gigantic Government stimulus packages, 2021 was always expected to show record growth, but again, this is growth in excess of recovery. The compounded advertising market growth over the two years 2020-21 was +9%, higher than the average growth experienced during the four years before COVID (+6% per year between 2016 and 2019). It shows that, on top of economic recovery and COVID control, several organic factors drove the tremendous acceleration of 2021 (detailed below).

Linear ad format sales (TV and long-form video, radio, print, OOH, cinema) grew by +9% to reach $268 billion worldwide. Regaining $21 billion of the $50 billion lost in 2020 (-17%). Global linear sales are thus back to 90% of pre-COVID (2019) levels. Most of the growth came from demand-driven inflation in media costs, rather than increased volumes, ad loads or impressions. Linear TV CPMs for instance, grew by an average +13% globally due to strong demand from many key industries (Retail, CPG/FMCG) and shrinking supply (linear viewing resumed its long-term decline following the COVID surge in 2020). As a result, TV spending grew by +9% in 2021.

While mature linear ad formats recovered more or less in-line with the economy, digital ad formats proved once again that organic growth factors – beyond simple economic and marketing recovery – are turbocharging adoption and spending. Changes in lifestyles, media consumption, and business models continued to fuel an acceleration in digital marketing from national consumer brands as well as small, local and “direct” advertisers. Digital growth from consumer brands comes partly at the expense of traditional linear channels, but in the case of small businesses (who represent the bulk of search and social ad spend and are growing much faster than big brands), it is almost entirely incremental money being added to the advertising pie. Digital advertising formats (search, social, video, banners, digital audio) grew by +31% to reach $442 billion or 146% of the pre-COVID market size. Digital ad formats now account for 62% of total advertising sales worldwide. All digital ad formats grew by double-digits in 2021, led by digital video formats (long and short form) +37%, social media +34% and search +33%. Pricing was also a key component to spending growth in 2021. Supply increased too as digital video and social media continue to grow in reach and time spent, but this still was not enough to meet exploding demand, which led to double-digit inflation in CPM or CPC costs.

Back to traditional ad formats, TV did well in 2021, with global ad sales reaching 168 million (+9% and 98% of the pre-COVID level) but radio was even stronger, although it had more ground to make up: +16% to 28 billion (89% of 2019 sales). Print ad sales were flat around 43 billion but when adding back the digital ad sales of news and magazine publishers, total print-related ad sales were up approx. +10%. Finally, out-of-home media sales grew by +12% to $27 billion. The slower and more gradual recovery of OOH was expected due to the declines in consumer mobility, particularly in the heavily advertised transit segment, hurting OOH media audience and reach for most of 2021. OOH global ad sales stand at just 83% of their pre-COVID level at the end of 2021, but MAGNA is confident that ad sales will increase by double-digits again in 2022 and grow back to the 2019 level by 2023.

In 2021, all seventy ad markets analyzed by MAGNA recovered to some degree. Sixty-eight out of 70 markets reached double-digit growth. Several of the worlds’ largest markets posted above-average growth including the US (+25%), the UK (+34%), Brazil (+30%), Canada (+27%) and Australia (+23%) while China (+17%) and India (+14%) grew below average. Growth was above average in EMEA (+23%), North America (+25%) and LATAM (+26%, partly driven by economic inflation).

Looking forward to 2022, there are two potential threats to the global economy and the advertising marketplace: COVID and supply chain issues. Turning first to COVID, the recent increase in cases and endless controversies about vaccination and passes should not hide the good news that the war against COVID is nearly won thanks to vaccination. Cases have increased again in 4Q21 to reach 500,000 daily worldwide by mid-November, but that remains well below the previous peaks of 800,000 cases per day and, more importantly, the number of deaths remains relatively low (7,000 daily). That is because 4.2 billion people have already received at least one dose of vaccine, representing more than half the world’s population (60% to 80% in most Western countries). Beyond some renewed mobility restrictions promulgated e.g. in Austria, Netherlands and Germany, most Government policies are prioritizing booster shots, encouraging or even mandating vaccination (Austria from Feb. 2022) rather than bringing back strict restrictions to circulation and business that hurt the economy. We are therefore optimistic that 2022, if not entirely COVID-free, will at least be exempt from the radical policy responses that caused the economy to fall in 2020 and kept it subdued for the early part of 2021.

The second risk lies with supply-chain issues, including the insufficient supply of semi-conductors causing some industries, most notably automotive, to cut production, as well as the insufficient capacity in global shipping and raw materials. We believe the latter issues will self-adjust gradually throughout 2022 as demand cools down and capacities recover, but there is uncertainty about how long the semiconductor shortage will affect the automotive and technology industries. We have factored this in as a headwind for media types that rely particularly on the automotive vertical, for instance local television in the US.

These risks and headwinds are largely offset, in our view, by the drivers on the horizon: strong economic growth (the IMF predicts +4.9%), further mobility recovery (esp. for transit), continued organic digital growth fueled by e-commerce, and no less than three cyclical events generating incremental advertising spending (Winter Olympics, US Mid-Term elections and FIFA World Cup). MAGNA thus predicts the global advertising market to grow by +12% and reach $795 billion in 2022. Linear ad format growth will moderate to +4% (still a stronger performance than pre-COVID) while digital ad formats will grow by +17% and reach 65% of total ad sales.

Next Global Ad Spend update: June 2022

APAC OVERVIEW

The Asia Pacific advertising economy grew by +16.5% in 2021, following the recession of 2020 (-0.8%). In 2022, the Asia Pacific ad market will expand by +11.2%, close to the global average of +12% and in line with the pre-COVID long-term regional growth. Growth is powered by large markets such as China (+16.7% in 2021, +8.0% expected in 2022), and India (+14.0% in 2021, +14.5% expected in 2022). In 2022, APAC advertising revenues will increase by +11.2% to $235 billion, 25% above the pre-COVID spending level, driven by digital advertising growth (+16.2%).

The experience of Asia Pacific with COVID throughout 2021 has been mixed. China has managed to keep cases almost at zero, while India saw a huge outbreak in the Spring and Summer, culminating above 400,000 cases per day at the peak. In addition, Japan, which had escaped unscathed throughout much of 2020, also saw a big spike in the summer to more than 20,000 cases per day. As a result, while the economic recovery has been robust in Asia Pacific, uncertainty remains as to whether the crisis is fully over or whether it will still see case rises and falls throughout 2022. Vaccine rollouts are also mixed. China and Japan have vaccinated three quarters or more of their population, whereas India’s vaccination rate is below 30% of the population and increasingly only slowly. Furthermore, many countries in Southeast Asia suffered their worst outbreaks in the last few months (Thailand, Philippines, Vietnam, Indonesia), which may cause brands to pull back on marketing activity.

On the other hand the experience of COVID and a home-centric lifestyle have changed the consumer behavior towards more streaming, more Ecommerce, and more integration of digital platforms into day-to-day lives, driving digital advertising spending. As a result, APAC’s total advertising spending grew by +16.5% in 2021 and will increase by +11.2% in 2022 to reach $235 billion. This will be significantly ahead of 2019’s pre-COVID total of $187bn.

Linear advertising spending (Linear TV, Print, Radio, OOH) grew by +6.5% in 2021 in APAC. In 2022, media owners’ linear advertising revenues will increase by a meagre +2.7% to represent 34% of total advertiser budgets. The growth of linear format spending in 2021 and 2022 will not come close to offsetting the huge declines in 2020. At the end of 2022, linear advertising revenues will still be just 88% of the pre-COVID total. In fact, despite the bounce-back in spend observed in 2021 and expected in 2022, linear advertising revenues remain on a long-term declining trajectory. For that reason, linear advertising revenues may never again reach the pre-COVID total of $90bn in APAC. By 2026, linear advertising revenues will represent just 25% of total advertiser budgets.

Digital advertising spending, on the other hand, continue to grow, and have even accelerated since COVID. Digital advertiser revenues grew by +23% in 2021, and will grow by +16% in 2022, to represent two thirds of total advertiser budgets. This is up from just 52% of total budgets pre-COVID in 2019. This is also higher than pre-COVID expectations, as consumer behavior changes during the COVID crisis and that are expected to persist into 2022 and beyond are positive for digital advertising spending trajectories. Increased Ecommerce spending, and increased video streaming, will both result in a higher share of attention and therefore ad revenues going to digital formats than pre-COVID.

The APAC advertising market is concentrated around the two largest markets China and Japan, combining to represent 70% of total regional ad spend and ad revenues. In 2022, the strongest growth in APAC will come from India (+15%), the Philippines (+14%), China (+13%), and Malaysia (+12%).

In APAC (like everywhere else) digital advertising is powering total market growth. Digital advertising revenues increased by +23% in 2021, and will increase by +16% in 2022 to represent 66% of total advertiser budgets. In 2021, growth primarily came from mobile advertising campaigns (+28% to nearly 80% of total digital budgets). By format, 2021’s growth came from search (+23%), video (+30%), and social (+27%). In 2022, mobile advertising spending will again grow rapidly (+19% to 82% of total digital budgets), as will search 17%), video (+19%), and social media (+18%). Smartphones are not just the dominant way that most consumers access the internet; in many APAC markets they are the only way most consumers access the internet. Because GDP per capita has only increased lately, many consumers skipped the desktop hardware generation and conduct their digital lives solely on their smartphones. Furthermore, in China, smartphones are more integrated into consumer lives than they are in almost every other market. Consumers regularly conduct not just their shopping and communications, but also their banking, insurance, and many work functions on their smartphones. By 2026, mobile advertising spending in APAC will represent 88% of total digital budgets.

In APAC, like in most global regions, lower funnel direct digital ad formats continue to perform better than upper funnel brand advertising-related formats. During COVID this was true because of the need to engage with consumers through Ecommerce. Following the crisis, these trends hold because digital consumption is even further integrated into consumer lives. Compared to pre-COVID totals, spending in 2022 on search (162% of pre-COVID total), and social (181% of pre-COVID total) will both be significantly higher than their pre-crisis counterparts. Banner display advertising, on the other hand (flat vs. pre-COVID total), will be struggling on a relative basis.

Television advertising spending grew by +8.3% in 2021 to reach $51.3bn, and it will increase by +1.9% in 2022 to reach 22% of total advertiser budgets. While this is the first growth year for television advertising since 2018, it does not come close to offsetting the declines during the COVID crisis. By 2022, television spending will represent just 94% of the 2019 pre-COVID total. Furthermore, linear television budgets will continue to shrink, and by 2026, they will represent just 17% of total advertising budgets in APAC. TV spending may get a small boost in 2022 because of the Winter Olympics in Beijing. However, this is only stabilizing budgets in 2022; television spending will resume its long-term decline starting in 2023 (-1.7%) as consumer attention shifts away from linear television to digital media formats.

Print ad sales continued to shrink in 2021 (-2.8%), and will be flat in 2022 (+0%), representing just 4% of total advertiser budgets. Furthermore, spending on print will represent just 70% of the pre-COVID total in 2019 by the end of 2022. Print represents such a small portion of total spending, however (just 4% in APAC) that these declines do not have a huge impact on total regional growth. Many verticals or brands that might consider deeper print cuts have already cut print formats entirely from their media plans.

Radio ad sales will increase by +1.7% in 2022 to reach $4.6 billion, following 2021’s -0.8% stagnation. COVID has eroded the importance of radio in media plans because of fewer hours spent driving. As a result, radio will continue to decline slightly through 2026, shrinking to just under 2% of total budgets.

Out of home advertising grew by +9.6% in 2021, and will grow by +7.9% in 2022 and represent 5% of total budgets. This will bring OOH spending back to 93% of the pre-COVID total. Cinema, however, fell significantly during COVID, and only recovered by +23% in 2021. Growth will be +30% in 2022, but that will only return cinema spending to about half of its pre-COVID total. Recovery has been further delayed by many of the additional COVID outbreaks seen in recent months in APAC.

One industry vertical that has been particularly hard-hit recently is the automotive vertical. COVID issues, combined with supply chain challenges particularly the shortage of semiconductor chips, has resulted in both decreased demand and lately significantly lower than usual production. APAC has one of the largest exposures to the auto vertical (9% of total ad spend pre-COVID). This is particularly strong in digital advertising, where automotive represents 14% of total ad spending. As a result, this will be a headwind to growth until automotive supply chain issues ease in the back half of 2022.

According to Leigh Terry, CEO Mediabrands APAC: “As the pandemic continues to impact consumer lifestyle options and choices across many markets, it comes as no surprise that accelerated digital ad revenues continue to take share, growing by +23% in 2021, with a predicted +16% in 2022. However we can see that APAC consumption is even more significantly skewed towards Ecommerce than it is in mature western markets. Giants like Alibaba, JD.com, Rakuten, and Pinduoduo, have grown to the point where shopping online is just as large as shopping in person, while ecommerce sales account for an average market share of 20% of total retail sales in the West.”

 

CHINA

中国

KEY FINDINGS

• Chinese media owners advertising revenues grew by +16.7% in 2021, the strongest performance since 2011. This will bring the total market size to CNY 675 billion ($98 billion), the second largest market globally behind only the United States.

 

• Chinese GDP will increase by +8.0% on a real basis, up from 2020’s +2.3% performance (which at the time represented the worst growth in decades).

 

• Digital ad formats saw spending grow by +20% to reach CNY 508 billion ($74 billion). This represents a huge 75% of total advertising budgets.

 

• Linear advertising formats grew by +7.1% in 2021, following 2020’s -19.4% performance. This regains some of the lost spending from the COVID crisis, but linear advertising revenues remain just 86% of the pre-COVID total.

 

Chinese media owners advertising revenues grew by +16.7% in 2021, the strongest performance since 2011. This will bring the total ad market size to CNY 675 billion ($98 billion), as China remains the second largest market globally behind the United States. This is extremely impressive considering that China was also one of the most resilient markets in 2020 during the COVID crisis, and one of the few to still grow advertising revenues during that year (+2.6%), but it is below global growth (+22%) for the first time ever.

China was the first market exposed to COVID, but ultimately has been very successful in combatting the virus. China and its zero COVID policy has been successful at keeping any small COVID outbreaks contained. Throughout 2021, cases have not gone above 150 per day. Furthermore, many adults are vaccinated with home-grown vaccines. As a result, consumer behavior has quickly returned to normal in China (compared to elsewhere in APAC and in Europe where new outbreaks or new controls are crimping regular spending habits).  It also does not hurt that Ecommerce is so tightly integrated into Chinese society, and that digital advertising spending already represented a huge portion of total budgets.

In 2021, Chinese GDP will increase by +8.0% on a real basis, up from 2020’s +2.3% performance (which at the time represented the worst growth in decades). In this environment, digital ad formats saw spending grow by +20% to reach CNY 508 billion ($74 billion). This represents a 75% of total advertising budgets, the second highest globally behind only the UK. Most of the growth is driven by advertising spending on mobile ad formats, which increased by +23% to reach CNY 432 billion and represent 85% of total digital ad spending. Mobile devices are far more integrated into day-to-day life in China than they are in many Western markets, with everything from shopping to finances fully enabled on mobile devices.

By format, Search remains, by far, the largest segment, and represents 57% of total digital budgets in China. Search advertising spending will increase by +19% in 2021, driven by both core search engines and Ecommerce platforms. Because in China, the five digital media giants (Alibaba, Tencent, Baidu, Sina, and Sohu) together control more than 75% of total digital advertising revenues, digital growth trends in line with their performance. For search advertising, Alibaba and Baidu are both growing in the mid-teen percentages compared to 2020. Q3 growth for most digital advertising companies in China was the slowest of the year, with single digit growth rates (the lowest since the first quarter of COVID).

Looking forward, MAGNA expects digital advertising to continue to outperform, and even the +20% growth rate from this year – despite the regulatory limitation – is impressive given the maturity, scale and scope of digital advertising in China. Beyond search advertising, digital growth will be led by social media (+23% to reach 19% of digital budgets), and video (+30% to reach 17% of total digital budgets). Static banners (+3.5%) and other digital (+2%) will be stable following declines in 2020 as they continue to lose share and favor with brands.

Linear advertising formats grew by +7.1% in 2021, following 2020’s -19.4% collapse. This regains some of the lost spending from the COVID crisis, but linear advertising revenues remain 14% smaller than the pre-COVID total. The television market is very concentrated in China, and a combination of cost increases and returning demand resulted in +8.3% growth in 2021 to represent 17% of total advertiser budgets. Looking forward to 2022, there will be a boost in TV spending as a result of the 2022 Winter Olympics hosted in Beijing. However, that may not be enough, especially with the more difficult comparison from 2021, to result in positive full-year growth. In 2022, television advertising revenues will be slightly down (-1.4%) as consumption trends once again result in headwinds for TV spending. Print formats continued their decline (-11% in 2021) and now represent just 1% of total budgets. Like most markets, budgets in China are concentrating around TV and digital spending. Radio advertising shrank by -8% this year. Finally, while cinema grew by a tremendous +287% in 2020, it remains just 60% of the prior pre-COVID spending total.

In 2022, the Chinese market will grow by +12.6% to reach CNY 760bn ($110bn), surpassing $100 billion for the first time. China will be the second ad market – after the US – to pass the $100 billion mark. Digital will drive the growth through the end of our forecast period. By 2026, digital advertising revenues will represent 85% of total brand budgets in China.

 

ABOUT THE RESEARCH

The MAGNA research is media centric. It monitors net media owners advertising revenues based on a bottom-up analysis of financial reports and data from media trade organizations; other ad market studies are based on tracking ad insertions or consolidating agency billings. The MAGNA approach provides the most accurate and comprehensive picture of the market as it captures total net media owners’ ad revenues coming from national consumer brands’ spending as well as small, local, “direct” advertisers. Forecasts are based on economic outlook and market shares dynamic. The full report contains more granular media breakdowns and forecasts to 2025, for 70 markets.

 

ABOUT MAGNA

MAGNA is the centralized Mediabrands resource that provides media marketplace intelligence and negotiation prowess for Mediabrands agency teams, affiliates and clients. MAGNA infuses the organization with knowledge that empowers better decision-making, including insights, forecasts, and strategic relationships.

MAGNA has set the industry standard for more than 60 years by predicting the future of media value. We publish more than 40 reports per year on audience trends, media spend and market demand as well as ad effectiveness. To access full reports and databases or to learn more about our market research services, contact [email protected].