MAGNA, the centralized IPG Mediabrands resource that develops intelligence, investment and innovation strategies, has released the June 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
- Global advertising spending will grow by $78bn in 2021 (+14%) to $657 billion, a new all-time high, following a decline of -2.5% in 2020. The marketplace will continue to grow in 2022 (+7%).
- Advertising activity is fueled by (1) economic recovery (global GDP +6.4%) benefitting key ad-spending verticals severely hit by COVID-19 last year (automotive, travel, entertainment, restaurants), (2) stronger-than-ever organic drivers to digital marketing, and (3) international sports events (Tokyo Olympics, UEFA Euro).
- Digital ad formats capture most of the growth with ad sales up +20% to $419bn, 64% of total adsales.
- Linear ad sales are slower to recover but will stabilize full-year (+3% to $238bn).
- All 70 ad markets monitored will expand again this year with China (+16%) and the UK (+17%) among the largest increases.
- The APAC market will grow by 12.8% to reach $203 billion, with digital ad sales up +19% and linear ad sales up +4.1%.
- China’s strong 2021 performance will result in ~$13 billion of incremental spending in 2021, the second highest globally behind the United States.
GLOBAL AD MARKET: +14% TO $657 BILLION
As the economy recovers faster than expected globally (GDP +6%) and in most markets, so do marketing activity and advertising spending. With the added driver of rescheduled international sports events, MAGNA forecasts global all-media advertising spending to grow by $78bn (+14%) to $657bn in 2021, a new all-time high. MAGNA also raises its forecast for advertising market growth in 2022 to +6.6% (previously +5%). The +14% growth expectation for 2021 would represent the highest growth rate on record, beating +12.5% in 2000, and a significant increase from MAGNA’s previous global forecast (Dec. 2020: +8%).
Economic recovery will lift all boats, but the contrast has never been wider between digital ad sales accelerating (+20% to $419bn) and linear ad sales (linear TV, linear radio, print, OOH, cinema) which are barely stabilizing (+3% to $238bn after 2020’s -18% decline). COVID may be receding in most markets but the changes to lifestyles, media consumption and business models continue to fuel an acceleration in the adoption of digital marketing from both national consumer brands and small, local and “direct” businesses. Digital growth from consumer brands comes partly at the expense of traditional linear channels but in the case of small businesses (that represent the bulk of search and social ad spend), it is mostly incremental to the advertising pie.
All of the 70 ad markets monitored by MAGNA will grow to some degree in 2021 and 2022. In 2021, Asia Pacific ad markets will grow by +13%, EMEA markets by +12%. Latin America and North America will both grow by nearly +15%. Everywhere, the pattern is similar, with linear ad sales to grow by low- to mid-single digits and digital ad sales growing by +20% or more. The United States remains the largest market and will increase by +15% in 2021, and will still remain ahead of China (+16%), Japan (+9%), the United Kingdom (+17%) and Germany (+11%) among the top five markets.
Nearly all digital ad formats will grow by double-digits in 2021 as total digital ad sales will account for 64% of global all-media ad spend. They will reach two-thirds of all advertising sales in 2022. The explosion of ecommerce will boost search by +20% to $200 billion, while growing marketing adoption and media consumption will drive social media by +26% to $119 billion. Video ads will grow by +24% to $57 billion as short-form, long-form AVOD and OTT ad spend are all fueled by increased reach and viewing. Out-stream video and static banners may grow at a more subdued pace (single-digits) due to the increasing limitations to tracking and targeting on websites (on Safari and soon Chrome) and apps (on iOS14).
Among linear ad formats, MAGNA expects linear television ad sales to recover as consumer brands (e.g. automotive, drinks) compete for returning consumers in a brand-safe environment. Advertiser demand will drive CPM inflation (average +8%) which offsets eroding ratings. In addition, international sports events bring additional ad budgets: Global TV ad sales will thus grow by +3% to $153 billion. Radio and out-of-home media will benefit from businesses re-opening in several key verticals (e.g. automotive, retail, entertainment) as well as a gradual return to consumer mobility that will restore their audiences; ad sales will increase by +5% and+10% respectively. Print ad sales will not quite stabilize as the return of key verticals (fashion, beauty, travel) will not offset the continued decline in circulation and ad pages. Newspaper and magazine ad sales will decrease by -4% and -5% respectively.
The scale reached by digital media owners and the stagnation of linear ad spend is forcing traditional media owners to consolidate to compete more effectively and invest in cross-media technology. MAGNA believes the spring announcements in the US (Warner/Discovery) and in France (TF1/M6 with a combined market share of 85%) are just the beginning of a new wave of mergers and acquisitions globally.
Vincent Létang, EVP Global Market Research at MAGNA and author of the report, said：
“As economic recovery is stronger and faster than anticipated in several of the world’s largest ad markets (US, UK and China, in particular) and consumption accelerates, brands need to reconnect with consumers. At the same time, the acceleration in ecommerce and digital marketing adoption that started during COVID, continues full speed into 2021, fueling digital advertising spending from consumer brands as well as small and DTC businesses. This unique combination of cyclical, organic and structural drivers will lead to the strongest advertising annual growth ever monitored by MAGNA: +14% globally (+15% in the US).”
APAC AD MARKET: +12.8% TO 203 BILLION
Asia Pacific has been less affected than other regions by the COVID pandemic and economic recession. Still, GDP growth fell by -1% in 2020 compared to typical economic growth of 6% per year over 2016-2019, but that was resilient compared to the global average of -3.3% for GDP last year. GDP will grow by +8.6% in 2021, powered by large markets such as China (+8.4%) and India (+12.5%). This is slightly higher than prior expectations, with overall APAC GDP revised up by +0.6% vs. October’s IMF forecast.
While the rollout of COVID vaccines has not been as aggressive as many Western markets (either due to lack of availability such as India, popular or political reluctant as in Korea or Japan), there were fewer cases, fewer deaths, and fewer shorter shutdowns vs. Western markets. That has not stopped consumers in Asia Pacific from changing their behaviour in the same ways as in heavily COVID-impacted markets: more streaming, more Ecommerce, and more integration of digital platforms into their day-to-day lives. As a result, economic recovery and organic digital growth will power APAC’s total advertising spending to +12.8% in 2021, following 2020’s -3.3% growth. This will see total advertising budgets in APAC reach $203 billion, significantly ahead of 2019’s $186 billion total.
In 2021, linear advertising ad sales (linear TV,print, radio, OOH) will grow by +4.1% to reach $76 billion. This follows 2020’s dismal -19% performance, however, and results in a 2021 linear ad sales total that is only 84% as large as the pre-COVID 2019 levels. In fact, while linear advertising spending will bounce in 2021 because of the extremely weak growth comparison, linear advertising sales are still in a long-term decline. By 2025, linear advertising sales will represent just 28% of total ad sales in APAC, down from 38% of budgets today. Digital advertising revenues, on the other hand, will charge ahead, growing by +19% this year (to $127bn), following a resilient performance in 2020 (+12%), to reach 63% of total budgets.Beyond the 2021 rebound, MAGNA expects APAC advertising spending to grow by an average +4.4% annually over 2022-2025, to reach $241 billion in 2025. This will continue to reflect divergent growth trends between linear formats (-2.6% CAGR through 2025), and digital formats (+8% CAGR through 2025).
APAC remains the second largest global advertising region, behind North America but $59 billion ahead of EMEA; while EMEA may close the gap slightly through 2025, APAC’s lead will remain significant overall. APAC markets now account for 31% for the global advertising market place, compared to 27% in 2010.
The APAC advertising market is concentrated around the two largest markets China and Japan, combining to represent 71% of total regional ad spend and ad revenues. This has increased over the past year, as China was one of the few markets to grow in 2020 because of strong digital performance, gaining share vs. the overall regional average which saw spending decline. All markets will grow in 2021, however, because even markets facing structural headwinds have an extremely easy growth comparison with 2020.
In APAC (like everywhere else) digital advertising is powering total market growth. Most digital ad formats are booming in 2021: In APAC (like everywhere Search (+19%), social media (+24%), and video (+21%) remain the growth engines of APAC digital ad market, while static banner formats show only modest growth (+3%). Mobile digital ad sales continue to be where most growth in consumption and spending lies as mobile ad format spending will grow by +23% this year, following 2020’s tremendous +19% growth. Smartphones and feature phone continue to play a larger role in the digital life of APAC consumers, and the Chinese market is one of the most advanced large mobile digital market globally, in terms of both features and in share of digital spending. Mobile advertising spending represents nearly 80% of total digital spending in APAC in 2021, and will increase to 87% of total digital spending by 2025.
In APAC, like in most global regions, lower funnel direct digital ad formats held up better because of COVID slowdowns compared to upper funnel brand advertising. These trends have continued even after the COVID crisis, as Ecommerce spending becomes even more integral to APAC consumer lives. China was always ahead of Western markets in terms of the total amount of retail spending that was transacted online, and Ecommerce in China got a boost just as it did in most other global markets because of COVID. As a result, Ecommerce sales are now comparable to offline sales and the trend continues to shift away from physical purchases. This will continue to power spending on search and social advertising formats, especially as social commerce is so integrated into daily life in APAC markets. Big online retailers, such as Alibaba, JD.com, Rakuten, and Pinduoduo continue their rapid growth.
Television advertising spending will grow by +4.3% in 2021 to reach $49 billion, bouncing off the 2020 lows of -14.7% growth and $47 billion. This will leave the TV market far short of 2019’s $56 billion total, however. Furthermore, television budgets will represent just 24% of total spending in 2021 in APAC, down from 38% in 2015. Through 2022, TV budgets will shrink by an average of -3.4% annually, meaning that TV spending will never again regain the 2019 totals. In addition, the Olympics in Tokyo were expected to be a supporting factor for brand advertising and television spending in 2020, but their postponement and the controversy around hosting the games in Japan will likely result in a smaller impact. Uncertainty around whether they will take place, the absence of foreign spectators, and potentially some reluctance to be associated with the controversy of the event, will result in some brands choosing to spend elsewhere.
Print ad sales will be flat this year (-0.3%), following 2020’s weak -28% performance, resulting in total print spending that is just 71% of the level of spending in 2019. Print represents such a small portion of total spending, however (just 5% 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 2021 to reach $4.6 billion, following a -23% decrease in 2019. Prior to 2019, radio had been growing since the recession of 2008, and COVID has eroded its importance in consumer media experiences. As a result, radio will continue to decline slightly through 2025, shrinking to just under 2% oftotal budgets. Out of home had been strong in APAC pre-COVID, but not surprisingly, COVID eroded its place in media budgets significantly. OOH spending fell by -22% in 2020, and will bounce by +8% this year, regaining some of the lost spending. This growth will be across both traditional OOH (+7%), and digital OOH formats (+11%). Cinema, however, fell by -67% in APAC in 2020 and will only regain a small fraction of the lost spending (+17%). Mobility has recovered in some markets (Japan, Korea), but in others like India it has significantly fallen because of recent COVID setbacks. This will allslow the pace of recovery for OOH.
Leigh Terry, CEO IPG Mediabrands APAC, said:
“The rebound in APAC has been strong and swift. GDP will grow by +8.6% in 2021, and economic recovery and organic digital growth fueled by consumer shifts to online behaviour throughout the pandemic will power APAC’s total advertising spend up to +12.8% in 2021. APAC remains the second largest global advertising region now accounting for 31% for the global advertising market place. Digital advertising is powering this growth, with most digital ad formats booming in 2021.”
CHINA
KEY FINDINGS
- Chinese media owners advertising revenues will grow by +16.1% in 2021, following 2020’s surprisingly robust +2.6% performance. This will bring the total market to CNY 671 billion ($97 billion).
- China’s strong 2021 performance will result in ~$13 billion of incremental spending in 2021, the second highest globally behind the United States.
- Digital advertising revenues will grow by +21% to reach CNY 512 billion (76% of total advertising spending).
- Linear advertising revenues will increase by +2.5%, following 2020’s -19.4% performance. This will only bring total linear advertising spending back to 83% of 2019’s spending levels.
- Digital advertising revenue growth will come from spending on mobile devices (+25% growth) as well as spending on search (+23%), video (+21%), and social (+25%).
Chinese media owners advertising revenues will grow by +16.1% in 2021, the strongest performance since 2011. This will bring the total market size to CNY 671 billion ($97 billion), the second largest market globally behind only 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 (+2.6%). China’s performance is ahead of the APAC average of +12.8% in 2021, and the global average of +13.5%.
China was the first market exposed to COVID, but ultimately was not one of the worst impacted thanks to an early, aggressive and effective government response. China has had just 91,000 total cases, and has not suffered a significant outbreak since the initial wave of COVID cases in early 2020. This is different from almost every other global market, where there have been multiple waves (the worst almost always coming over the 2020 winter and into early 2021). Life in many regions of the country i largely back to normal. As a result, consumers have continued to spend through the crisis, and brands have continued to support their businesses through advertising campaigns. 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 +8.4% on a real basis, up from 2020’s +2.3% performance (which at the time represented the worst growth in decades). This is only slightly ahead of prior expectations since China had already successfully tackled COVID last fall.
Digital ad formats will see spending grow by +21% to reach CNY 512 billion ($74 billion). This represents a huge 76% of total advertising budgets, the second highest globally behind only the UK (79% of budgets). Most of the growth is driven by advertising spending on mobile formats, which will increase by +25% to reach CNY 437 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 58% of total digital budgets in China. Search advertising spending will increase by +23% 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, in Q1 of 2021, Alibaba saw +40% growth, and even Baidu (which shrank by -7% in 2020 for search advertising revenues) saw +26% growth. 1Q was the worst period of COVID impact in China, so the comparison was the easiest, which is one reason why MAGNA expects growth to slow slightly through the year. But this is still tremendous performance, and reflects a digital advertising landscape that is exploding due to the even stronger embrace of Ecommerce by consumers following the COVID crisis. Beyond search advertising, digital growth will be led by social media (+25% to reach 19% of digital budgets), and video (+21% to reach 16% of total digital budgets). Static banners (+1.5%) and other digital (+0%) will be stable following declines in 2020 as they continue to lose share and favour with brands.
Linear advertising formats will grow by +2.5% in 2021, following 2020’s -19.4% performance. This continues a trend seen in many mature global markets of linear media only regaining a little bit of the lost revenues from the COVID crisis, while digital powers ahead and continues to take share. Within linear advertising spending, TV growth will be 83% of 2019 spending levels. The television market is very concentrated in China, and while that typically allows for some insulation through price controls, demand evaporated during COVID. While there is some tailwind to TV spending this year from events such as the Tokyo Olympics. However, that cannot change the fact that many brands reoriented their brand first strategies around digital formats during COVID and there is likely no going back. Print formats will continue to decline (-4.2% in 2021) following 2020’s -26% performance. While this is the best print performance in years, it reflects a weak market that no longer represents hardly any share of advertiser budgets. Radio advertising will shrink by -2.4% this year following 2020’s -27% performance. Finally, cinema was devastated in 2020, falling by -84%. While cinemas are starting to open back up, consumers are not returning in large numbers yet and spending will remain just ¼ of 2019 levels in 2021.
In 2022, the Chinese market will grow by +5.9% to reach CNY 710bn ($103bn), surpassing $100 billion for the first time, and representing only the second market – after the US – to pass the $100 billion mark. Digital will drive the growth through the end of our forecast period. By 2025, digital advertising revenues will represent 85% of total brand budgets in China.
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