GroupM predicts TV spend will increase while digital will slow due to duopoly and fraud in 2018

The WPP company also predicted that even though advertising’s share of the global gross domestic product will be down 0.69% in 2018, from 0.7% in 2017, the growth of the GDP will increase, due to rising consumer demand, fixed investment, industrial production and exports.

Explaining the decreasing share for advertising, GroupM said this reflects a long trend of decreasing share for advertising, often cited as evidence of a structural industry challenge. However, it points out that a large factor for this is the amount of ad money now directed to data and technology for consumer engagement in digital.

“Growth is wide with more people working, but shallow with wages growing slowly. If the global economy sustains its rising demand for labour, it may reveal a widening skills gap. Then, competition should raise wages, spurring investment in productivity and helping inflation to finally surpass central bank targets,” said Adam Smith, futures director at GroupM

“For every dollar that migrates from legacy to digital media, GroupM estimates 25 cents goes to technology and data. This is not counted in a now antiquated concept of working media investment. We also know that in periods of low inflation, marketing money gets reallocated to promotion; this is a cyclical challenge, not a structural one.”

Globally, it predicted that television investment will grow 2.2% in 2018, up from 0.4% in 2017. Yet alongside that, digital investment growth is expected to be at 11.3% next year, a slight slow down from 11.5% in 2017. Despite this, its share will increase from 34.1% in 2017 to 36.4% in 2018.

As Google reported ad revenues of $24B and Facebook reported $10B at close of the third quarter in 2017, GroupM believes these two companies will account for 84% of all digital investment and 186% of digital growth when 2017 comes to a close.

It warns that this is exceedingly bad news for the balance of the digital publishers ecosystem, as Amazon quickly becomes a prominent player in the consolidation of digital ad investment within a few dominant players. But despite its on-platform search, and display advertising combined with their off-platform advertising revenues, Amazon is in the low single-digit billions.

Even though digital will continue to grow and programmatic buying along with it, GroupM’s analysis of the US revealed that programmatic budgets are estimated at 20% of digital spending (excluding social platforms) and have not increased as quickly as expected.

It believed that concerns over supply chain integrity and brand safety are to blame, as some programmatic partners do not support the ad industry’s call around prevention to protect brands appearing against violent, sexually suggestive, or politically extreme content, including fake news.

Finally, it explained that as consumer attention continues to fragment across platforms, many see virtue in Out-of-Home, which is also becoming more data-informed, digital and versatile. In addition, it is the only medium growing share, apart from digital. The combination of location data with purchase, social media and viewing behaviour presents an increasingly compelling proposition, as it is set to grow share from 6.1% in 2016 to 6.2% in 2017 and 6.3% in 2018; the highest since 1993.

Radio is almost holding onto its share (4.4% this year, 4.3% next) as it is less disrupted and innovates with content and social media.

“2017 is a challenging year. Brands are operating in hyper-competitive and low growth markets, challenged to deliver in the near-term. Legacy media continue to be challenged by audience fragmentation and competition from the dominant digital players, and those giants have grappled with their own far-reaching success as consumers misuse their user-generated platforms,” said Kelly Clark, global chief executive at GroupM.

“Sitting between strained clients and stressed media partners, agencies understandably also saw challenges in 2017, but it would have been much worse for our clients had they not had us to help navigate marketplace dynamics. We believe marketers have an enduring need for objective partners who can operate across the whole media landscape to develop the most integrated campaigns, as well as to help shape standards, measurement and integrity.”