Two thirds of all the growth in global ad spend between 2017 and 2020 will come from social media and paid search ads, according to Zenith’s latest Advertising Expenditure Forecasts, published today. Over this period, total spending on social media will rise by $28bn (£21.3bn), from $48bn to $76bn, while paid search ad spend will increase by $23bn,from $86bn to $109bn.
Zenith notes that paid search has undergone constant development in recent years. Search platforms, agencies and brands are applying ever more sophisticated artificial intelligence techniques to improve targeting, messaging and conversion. Search is becoming more integrated with commerce, both online – as brands shift budgets to eCommerce platforms – and offline, as retailers use location and store inventory data to match active shoppers directly with the products they’re searching for. All these developments are attracting higher performance budgets from brands, and this is often new expenditure, rather than funds diverted from brand awareness activity.
Overall, Zenith expects them to drive an average of 8 per cent annual growth in paid search ad spend between 2017 and 2020.
The next step in the evolution of search is voice search, but so far there has been little direct advertising through voice assistants. When users make a voice search on a smart speaker, they will normally only be presented with the first organic result; voice searches on smartphones may present more results, but not as many as manual searches. The rise of voice search therefore makes it more important for brands to identify the keywords they absolutely need to own, and to build content that sends them to the top of organic results, Zenith says. The company expects that the major search platforms will eventually make paid search work with voice assistants, but for now, it says, brands need to concentrate on voice SEO, limiting the growth potential of paid search in the short term.
Much of the recent rapid growth in social media advertising has come as platforms have replaced static ads with more engaging video ads. So far these social video ads have acted more as complements to television ads than competitors, but the platforms are now competing with television more directly by hosting long-form content such as sport, drama and comedy, and inserting mid-roll ads like those seen in television breaks. Overall, Zenith expects social media ad spend to grow by at an average rate of 16 per cent a year between now and 2020, twice the rate of paid search.
The fastest-growing traditional medium is cinema, which Zenith forecasts to grow by 16 per cent a year thanks to rapidly rising admissions in China. It is a tiny medium, though, representing just 0.8 per cent of total ad spend this year. Otherwise, outdoor is the strongest performer, with 3 per cent annual growth. Outdoor, Zenith notes, is benefiting from its wide reach and ability to create mass awareness, which allows it to complement highly targeted online advertising for premium brands. While targeted online ads move buyers along the path to purchase, premium brands still need to create widespread awareness among non-buyers – a premium brand will only remain one if everyone recognises its premium value.
Zenith has held its forecast for global ad spend growth this year at 4.5 per cent. Some markets (notably Canada and the UK), have strengthened since it published its previous forecast in June, but these have been counterbalanced by markets that have weakened, particularly the Middle East and North Africa (MENA). Zenith’s forecast for 2019 is also unchanged at 4.2 per cent growth, but it has reduced its forecast for 2020 from 4.3 per cent growth to 4.2 per cent. Growth will therefore remain within the 4-5 per cent range it has maintained since 2011.
Zenith has revised its forecast for ad spend growth in Canada this year from 3.8 per cent to 5.6 per cent, and in the UK from 0.7 per cent to 2.4 per cent. These two revisions alone will add $581m to the global ad market this year. It has also made substantial upward revisions in Vietnam ($131m), France ($121m), and Taiwan ($104m). Western Europe is the most improved region, revised up from 2.3 per cent growth to 2.6 per cent growth in 2018.
After conducting new research into true levels of expenditure in MENA, Zenith has thoroughly revised its estimates of historic ad expenditure in the region. It has also added figures for Iraq, Jordan and Syria, as well as channels targeting Asian-language speakers across the region. The net effect of these changes is that its estimate of regional adspend is now higher than it was previously, but so too is its estimate of the impact on ad spend of from the drop in oil prices since 2014, political turmoil and conflict.
Zenith now considers that ad spend om the region shrank by 40 per cent between 2014 and 2017, more than its previous estimate of 33 per cent. And while it estimates that ad expenditure across MENA totalled $3.6bn in 2017, ahead of its previous figure of $2.4bn, it now forecasts an average annual decline of 5.5 per cent to 2020, well below its previous forecast of 1.4 per cent average annual decline.
“Better use of AI and integration with retail is driving continued strong growth in paid search,” said Jonathan Barnard, Zenith’s head of forecasting and director of global intelligence. “As voice search becomes more important, though, brands will need to focus more on content and SEO to secure first-place organic results for their most important keywords.”