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Global ad spend sees faster-than-expected recovery thanks to e-commerce and video boost

A pivot toward e-commerce and video has seen global ad spend swiftly fall, according to new forecasts

A pronounced pivot toward e-commerce and video has seen global ad spend bottom out quicker than expected, with forecast falls now expected hit the floor with a 7.5% contraction to $587bn in 2020 - as opposed to a 9.1% fall as initially feared.According to Zenith’s Advertising Expenditure Forecasts, the advertising sector is proving to be more resilient than expected and is now expected to bounce back by 5.6% next year to reach $620bn.No mere dead cat bounce the rise is given credence by a surge in connected TV advertising as well as the delayed Summer Olympics and UEFA tournament.

How is global ad spend holding up?

  • Zenith’s metrics show that 2021 growth of 5.6% will be fractionally behind the 5.8% uptick it forecast back in July, falling short of the $634bn spent in 2019.

  • A recovery to pre-crisis spending is not expected until 2022, when a further 5.2% growth will see spending total $652bn.

  • All these forecasts are couched under the proviso that there will be no further black swan events to snuff out the tentative recovery.

  • What factors lie behind the improving outlook?

  • A universal shift in advertising budgets towards digital channels is providing a much-needed source of growth, with global digital ad spend expected to rise 1.4% in 2020, equivalent to a 52% share of total ad spend.

  • An explosion in e-commerce growth is not expected to tail off either, with Zenith confidently predicting that digital will account for 58% of all spend by 2023.

  • Another bright spot lies in connected TV's as people flock to streaming video-on-demand (SVOD) providers such as Netflix and Disney+, whose reach has expanded by 5% in the US as people switch off from the world outside.

  • While advertisers are locked out of SVOD, ad-funded video on demand has enjoyed the strongest growth of all, jumping 9% to reach 5.5m US households.

  • Commenting on the findings Christian Lee, global managing director at Zenith, said: “Now that it offers mass reach in key markets, it’s the right time for brands to invest in connected TV.

  • ”Brands should use connected TV for both branding and performance, exploiting its high ad recall and full targeting and tracking capabilities to drive awareness and sales conversions at the same time.”

How is e-commerce shaking up ad spend?

  • A revolution in retail is feeding through to unprecedented demand for retailer media which promote products at the point of purchase, akin to in-store displays of old.

  • Crucially retailer media is allocated from commercial rather than marketing budgets, thus expanding ad expenditure as a whole. In all, Zenith anticipates the sector will jump from $35bn spend in 2019 to $51bn in 2020.

  • Ali Nehme, global chief commerce officer at Publicis Groupe, said: “Retail platforms are powering their growth by putting pressure on brand margins. Their focus on bottom out price wars, and enhanced consumer experiences, benefit consumers while brands bear the cost.

  • “In this scenario, brands must flex their power, by selecting retailer partners who offer demonstrable value through transparent data and measurement, as well as the ability to deliver the consumers who will drive much-needed category growth.”

  • A global jump in social media ad spend of 56.4% in the third quarter has also provided a timely boost.

Are there any regional variations in performance?

  • The global picture in the report masks significant regional variations with Asia Pacific, Central and Eastern Europe expected to lead the way in terms of growth, attaining 2019 levels of ad spend as early as 2021.

  • Zenith expects ad spend in both regions to shrink by 6% in 2020 and grow by 7% in 2021.

  • Elsewhere North America is expected to prove more resilient than most, declining by just 5.3% in 2020 courtesy of a spending boost driven by the presidential election.