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GroupM tips ad spend to hit $547bn, despite economic fears over Brexit and Trump

By Sean Larkin, Programmatic Reporter

December 5, 2016 | 4 min read

Despite widespread economic uncertainty prompted by the shock results in the US presidential election and Brexit votes, advertisers are not tightening their belts, according to WPP’s GroupM which today (December 5) forecast global ad spend will hit $547bn in 2017.

GroupM predicts that Brexit is yet to have an impact on UK media budgets

The revised spending forecast (up 4.4% year-on-year) described ad spend growth between 2016 and 2017 as “modest”, adding that “brands continue to be pressured for performance in low-growth environments” (ie the markets of Western Europe and North America), with “new world countries” (such as those markets in APAC) continuing to “over-contribute” to global growth.

Across the globe digital’s share will reach 33% of all ad spend, with GroupM also noting that digital captured 72 cents of every new ad dollar in 2016, and that TV account for 21 cents. The WPP outfit further went on to predict that next year digital will capture 77 cents per new dollar, TV will get 17 cents.

It went on to state that “advertising budgets have not yet been impacted” – even though financial markets have been – this is despite the shock voting outcomes in the US and UK this year.

The US advertising market will be one of the chief contributors to the global growth forecast in 2017, with GroupM fractionally upgrading its 2016 growth estimate from 3.1% to 3.2%.

Included in this revised upgrade, was an increase in TV ad spending from 3.4% to 4.1%, with GroupM noting that this year’s “less robust election spending” was offset by Summer Olympics demand, adding that this trend saw “some redirection of budgets from digital to TV”.

For 2017, GroupM shaved its US growth forecast to 2.6% on the basis of the weak global and US GDP growth, plus political uncertainty which as yet has not impacted budgets.

Speaking with The Drum, Adam Smith, GroupM, futures director, said that data wasn’t available to make a more accurate assessment of the impact of the victory of US president-elect Donald Trump in the year ahead.

“We did have a quick survey of opinions about Trump internally and the overwhelming response internally was that it was too early to say,” he explained, adding that staff at the WPP media investment unit would continue to monitor what domestic policies a Trump administration would pursue once in office.

Meanwhile, even though the UK Brexit vote has impacted financial markets,to date it has not impacted advertising, according to GroupM, which revised its UK forecast up due to a digital-fueled 7% annual run-rate, This would equate to a prospective $3bn incremental investment over the two years 2016-2017. This compares to $3.3bn from the rest of the EU combined.

“Try as I might to find people will to admit that clients were willing to cut spending over the Brexit referendum, there was no evidence whatsoever of this, and when I waited for spontaneous comments from our colleagues in the rest of Europe, the only ones to mention Brexit as a negative factor were in the Republic of Ireland – the economy which has the greatest exposure of any to the UK,” said Smith.

He went on to comment that the perceived negative economic impact of Brexit “is mostly being used so far as an excuse by media owners for under-performance, delayed capital programs, and for those whose digital revenues are behind plan”.

Smith went on to say that this is by no means a guarantee that the impending UK withdrawal from the EU won’t have an impact on ad spend there. "But in the UK, the stampeded for digital media is by far the greater dynamic," he added.

The results were derived from figures contained in WPP’s worldwide resources in advertising, public relations, market research and specialist communications and published in a report entitled This Year, Next Year.

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