Ad Spending Rises: Goodbye Mad Men, Hello Bots

Michael Hedges April 10, 2014 Follow on Twitter

Advertising people follow trends better than anybody. Their currency is the newest, latest and greatest. But the tools of the trade - slick phrases, clever visuals, unique display – aren’t what they used to be. The geeks have invaded. “Believe me,” said Don, “everybody thinks this is temporary.”

Global media buyer ZenithOptimedia (ZO) delighted the advertising people with a quite positive forecast this week. The view of the future, little by little, has become brighter. Planetary ad spending this year will rise 5.5% over last to US$537 billion, a 0.2% boost from ZO’s December forecast. And it just gets better: 5.8% rise for 2015 and 6.1% in 2016.

The regional spending picture is much as expected. Ad spending in the US will, says ZO, contribute most to bullish spending, jumping US$24.1 billion over the next three years, which include two election campaigns and the Rio de Janeiro Summer Olympic Games, time zone parity greatly affecting TV coverage. After that, ad spending in China will add US$16 billion, followed by Indonesia (US$6.7 billion), Argentina (US$6.5 billion) and Brazil (US$3.5 billion).

By 2016 the top ten ad spending countries will shift a bit. China will become the second biggest spender, Japan falling to number three. Germany, the UK, Brazil and Australia will remain 4th through 7th, respectively. New to the list is Indonesia, expected to rank 8th in 2016. South Korea will move up to 9th. The ad spending ranking for France will drop to 10th as Canada falls off the top ten list.

Ad spending in Europe is, mostly, emerging from recession. ZO forecasts growth this year at 0.7%, the first increase since 2010.  The growth rate, they predict, will almost blossom to 1.5% in 2015 and 1.6% in 2016. The sour note is continued ad spending declines expected in southern Europe. Ad spending growth in Russia was downgraded from 9.7% to 8.6%, said ZO, citing “changes in the political and economic situations.”

In the Middle East and North Africa region ZO expects 2014 ad growth of 7.1%, mostly recovering from Arab Spring turmoil, then dropping back to the 4% to 5% range over the next two years.

“Advertisers are gaining in confidence as the world economy returns to stable growth,” said ZO CEO Steve King in a statement. “They will find plenty of opportunities to generate strong returns on their advertising investment in the fast-growing digital media, but should remember that television has lost none of its power to reach large and engaged audiences.”

Yes, of course, TV is still the one, 40.1% of all ad spending in 2013. For this year the ZO projected growth rate is 5.2% then sliding a bit lower through 2016. By then the TV piece of all ad spending will fall to 39.2%, partly on audience migration to pay TV channels. All traditional platforms will take less of that pie, or cake or whatever it’s called. The printed media – newspapers and magazines – will see their share drop from 24.8% to 20.1% in 2016. Radio and outdoor ad spending will drop slightly. This is it. This is the big one.

“Internet advertising overtook newspaper advertising for the first time in 2013,” said the ZO report, “and we forecast it to exceed the combined total of newspaper and magazine advertising in 2015. Newspapers and magazines will continue to shrink at an average of 1% to 2% a year.”

According to the current ZO forecast the global gap between TV and internet – desktop and mobile – ad spending will be 39.2% vs. 27.1%. And to think a decade ago internet ad spending was a mere 4.4%. The mobile part – all forms of smartphone and tablet advertising, including ads in apps – will screech from 2.7% of all ad spending in 2013 to 7.6% in 2016. “Mobile will leapfrog radio, magazines and outdoor to become the world’s fourth-largest medium by the end of our forecast period,” said ZO.

Of course, mobile devices are pervasive, popularity growing and ads flowing through them extremely attractive to media buyers. Big data and the technology to instantly crunch it fuels much of the demand for mobile advertising. “The rise of ad tech, which not only lets brands and businesses have more control over what they buy and where it’s being seen, but also provides a greater amount of data to be able to measure the impact that their marketing investments are having,” said TechCrunch (April 8), reviewing the ZO forecasts. “Ad tech, in short, is fuelling the machine.”

The Mad Men era is truly over.

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