There will be an average 6.1% increase in media prices in 2020, as the commercial audiences supplied by media owners shrinks by approximately 1.6%.
The Global Advertising Expenditure report from Zenith paints a bleak picture for advertisers for the year ahead, saying after the sustained decline in commercial print audiences, the industry is now seeing the same with TV amid the rise of ad-free streaming services like Netflix, Amazon Prime Video, HBO, and Disney+.
Price inflation will counterbalance the decline in global audiences for TV, leading Zenith to predict that there will be zero growth in the medium over the next three years.
However, the newspaper and magazine industry will not be able to counter the effect as easily. Prices are rising for printed newspapers and magazines but not quickly enough to compensate for the persistent and rapid decline in readership. This means newspaper ad spend will shrink by 4.5% a year to 2022, and magazines will shrink by 8.1% a year.
Overall it said that the supply of commercial audiences has shrunk by 1.3% a year on average since 2010 while media inflation has averaged 6.5% a year.
"This is a continuation of a trend that has shaped the ad market for the whole decade, but what we’re now seeing is that TV inflation has reached high enough levels that it’s forcing brands to shift spend to other channels, even though they are generally less effective at generating rapid mass reach," said Jonathan Barnard, head of forecasting at Zenith.
"Overall brands have been faced with a choice: continue to rely on TV, spending more to get less, or invest in data and technology that allows them to aggregate digital audiences cost effectively. The latter is a more sustainable strategy in the long term."
Internet ad spend will continue to grow though, the pace at which it's rising will slowly decline. In 2019 it was up 11% and this will fall in 2020 to 10% growth and average 9% growth by 2022, when Zenith expects internet advertising to account for 54% of global ad spend (it currently stands at 47%).
However, inflation for online advertising is even higher than TV with Zenith estimating it will hit 9.1% in 2020.
"Demand is running well ahead of supply, because of this need to make up for falling mass audiences through television channels, and the influx of small-business advertisers on Facebook and Google," added Barnard. "Also, the quality of digital environments is improving, allowing advertisers to use the likes of Instagram or long-form video platforms for proper brand-building campaigns."
Display is winning the majority of this ongoing spend, which includes everything from banner ads to online video and social media, while paid search and classified are now both lagging behind display, growing at an average of 7% and 1% a year to 2022 respectively.
Tim Irwin, chief executive for EMEA at WPP media agency Essence said clients are already shifting spend accordingly.
"When there is competition and a scarcity of inventory, brands must continually evolve and divest their spend in other channels - for our clients that means keeping up to date with media price inflation across the ecosystem, and assessing whether that change justifies spending and adjusting accordingly. Our clients are always exploring new channels, but when it comes to top budget winning channels they will always be the ones which provide transparency, measurement and ease of working," he said.
"Offsetting these kinds of changes are one of the many reasons we continue to invest significantly in machine learning-driven optimisation of planning and buying."
Growth of global ad spend stalls despite tentpole events
Despite the world’s eyes set to be on events like the Tokyo 2020 Summer Olympics, Uefa Euros and US Presidential elections – 2020 is a so-called ‘quadrennial’ year – there has been no upgrade to growth in advertising expenditure.
In 2019, total ad spend grew 4.2% but in 2020 it will rise by just 0.1% more to reach $666bn (£507bn).
Zenith said it would normally expect a “comfortable” year-on-year growth of ad spend but laid blame for the non-existent movement on the US-China trade war which is "interrupting supply chains and rerouting trade and investment". Overall, the tense relations between the two superpowers has led to uncertainty among advertisers and resulted in strict budgeting.
Zenith estimates this economic headwind will cost the global ad market 1.1 percentage points of growth in 2020. Without it, the market would be up by 5.4%.
Yet despite the trade dispute, the US and China are still leading global ad spend growth. The US ad market is forecast to grow by $39.1bn between 2019 and 2022, while China grows by US$10.3bn, and together will account for 56% of all growth in ad expenditure over the next three years.
Spend in North America has largely been boosted by the flood of new small and medium-sized companies using Facebook and Google to advertise for the first time, Zenith said.
However, India will take over as second-biggest contributor to ad growth in mid-2020s. Its expenditure will grow by $4.3bn between 2019 and 2022 with Zenith saying it has “great potential for long-term growth”.
Meanwhile, though political uncertainty continues to plague the UK ad market it will grow by 4.9% in 2020, up from 3.2% in 2019. This has been driven primarily by very strong digital spending, which will be up 6.9% next year.
“We expect strong growth from UK advertising next year, despite the political and economic uncertainty, because it is embracing the digital transformation of marketing wholeheartedly,” said David Mulrenan, Zenith UK’s head of investment.
“In 2022, the share of UK ad spend devoted to digital media will reach 71%, making the UK the first market in the world to exceed 70% digital ad spend.”