- In its latest report on global advertising market trends, released December 3, 2018, MAGNA reveals that global advertising revenues grew by a record +7.2% in 2018 to reach a total of $552 billion in the 70 countries analyzed by MAGNA.
- That’s the strongest growth rate since 2010, when the ad market recovered after two years of recession, and the second strongest since 2004, thanks to the combination of strong demand and cyclical drivers.
- Global ad spend remains strong (US +7.5%, China +12%, Russia +14%, India +14%) thanks to robust economies, while Western Europe lagged behind due to economic slowdown and political uncertainty.
- Digital advertising sales grew by +17% in 2018 – 1.5% above previous forecast – to reach $251 billion or 45% of global advertising revenues, driven by search (+16%), video (+29%), and social media (+33%). Non-digital ad sales (linear TV, linear radio, print, and out-of-home) were flat (+0.2%) at $301 billion.
- MAGNA increases its forecast for 2019 advertising growth to +4.7%, as the macro-economic environment is expected to remain strong in most of the top advertising markets (e.g. US, China, India).
- Digital advertising growth will slow down next year (+13%) but, at that rate, MAGNA predicts that digital media ad formats will attract half of the world’s total ad dollars as early as 2019 or 2020.
- In the US, advertising sales grew by +7.5% in 2018 to reach an all-time high of $208 billion, including a record four billion dollars from midterm elections. Digital ad sales grew by +16.6% this year to pass the $100 billion milestone (52% of total ad sales) while non-digital ad sales stabilized thanks to cyclical drivers (-0.7%).
- For 2019 MAGNA predicts US advertising growth to slow down to +2.4%, mostly due to the lack of cyclical events. Excluding the impact of cyclical events in 2018 and 2019, underlying ad spend will grow by +4.5% in 2019, compared to +5.3% in 2018.
According to Vincent Létang, EVP, Global Market Intelligence at MAGNA, and author of the report:
“Global Advertising Spending expanded by the strongest growth rate since 2010 this year. This record growth was fueled by the combination of a robust economic environment prompting most verticals to increase ad spend, as well as stronger-than-expected cyclical spend. Digital media was again the main winner but television proved resilient, thanks to the loyalty of consumer brands, strong pricing and incremental cyclical spend.”
15 GLOBAL FINDINGS
- Globally, net media owners advertising revenues (NAR) grew by +7.2% in 2018, to $552 billion. This is above MAGNA’s previous forecast (+6.4% published June 2018) due to stronger-than-expected market performance in the second half and stronger than expected cyclical events.
- 2018 was the ninth consecutive year of growth for global advertising revenues. Following the recession of 2008-2009 (-12%), the market grew by an average +5.5% per year over 2010-2018, growing by 60% overall through that period.
- The major cyclical events that took place in 2018 (The FIFA World Cup in Russia, Mid-Term elections in the US, Winter Olympics in South Korea) generated approximately six billion dollars of incremental ad spend, the highest volume ever, mostly due to record political spending in the US.
- Cyclical events contributed more than one percentage point (+1.2%) to global ad growth in 2018. Excluding the cyclical effect, global advertising spending growth would have been +6.1%, still higher than the normalized growth rate for 2017 (+5.3%). It is therefore continued strong underlying demand from advertisers that proved the main driver in 2018.
- Global advertising demand was strong in countries enjoying a robust economic environment (Ad Spending: USA +7.5%, China +12%, Russia +14%, India +14%) while Western Europe lagged behind due to low economic growth and political uncertainty, but double-digit digital growth and a boost in TV sales thanks to the FIFA World Cup ensured decent growth in Western Europe nevertheless(+4.8%).
- 67 of the 70 markets analyzed by MAGNA showed some level of growth in 2018, with Singapore, Peru and Bahrain the only markets to shrink. The fastest-growing markets were Argentina and the Ukraine (resp. +20% and +25%) but that was mostly driven by economic hyper-inflation. Many emerging markets grew by double-digits: India (+14%), Egypt (+16%), Vietnam (+11%) and Brazil (+12%, helped by the presidential campaigns and the World Cup).
- Linear television ad revenues grew by +3.4% to $184 billion, thanks to cyclical events (mostly the Winter Olympics in North America and the FIFA World Cup in the rest of the world). These events were not enough to curb the continued erosion of ratings but they contributed to an acceleration in cost-per-thousand inflation (+8% in 2018 compared to +6% in 2017).
- Television is the only “traditional” media category to benefit from such strong pricing power, while print and radio prices are stagnating or even declining in some markets. The robust demand for television, despite ever-increasing costs, came from the combination of various factors this year: (i) incremental spend from sports-oriented brands (drinks, automotive) (ii) loyalty from big consumer brands in CPG/FMCG sectors (food, personal care and household goods, restaurant chains and pharmaceuticals) that value the reach, brand safety and transparency of traditional linear TV (iii) organic growth from the technology sector and internet giants promoting new products (voice assistants) or engaging in branding campaigns, and (iv) growing ad sales from “advanced” TV ad formats (e.g. over-the-top or household addressable campaigns like Sky Ad Smart in the UK).
- Global Digital advertising sales (banners, video, search, social) grew by +17% in 2018, to $251 billion, while offline ad sales (linear television, print, broadcast radio, out-of-home) were flat, and grew by +0.2% to $301 billion.
- Digital advertising in 2018 barely slowed down from 2017’s growth rate (+17.6%), despite new regulations on data privacy (e.g. GDPR in Europe) and the concerns expressed by some consumer brands in the last 18 months. Growing user consumption in emerging markets, product innovation, and robust demand from long tail advertisers drove search advertising growth of +16%, while video (+29%), and social media (+33%) grew even faster.
- The majority of digital ad sales (62%) is now generated by impressions and clicks on mobile devices (mostly smartphones). Mobile ad sales grew by +32% in 2018 while desktop-based ad revenues shrank (-2%), due to ad blocking and lower inventory.
- Digital media sales now represent 46% of total advertising sales in 2018. Maturity means growth rates will slow down in the next few years, but spending will still grow by double-digits in 2019 (+13.3%), which should ensure digital ad sales represent nearly half (49%) of global ad dollars next year.
- Other media categories struggled to various degrees in 2018 as they did not benefit from the pricing power and cyclical drivers of television. Global Print NAR decreased by -11% to $55 billion. Radio ad sales decreased by -1% to $28 billion; the decrease in revenue was similar to the one experienced in 2017. The only “traditional” media category to show moderate growth in 2018 was, again, Out-Of-Home. Global OOH NAR is forecast to grow by +4.6% to $34 billion (including cinema). OOH did benefit from cyclical events but the main driver remains the organic growth of digital OOH inventory in premium locations and “placed-based” environments. DOOH NAR grew by +16% this year to reach $5.7 billion.
- For 2019, MAGNA forecasts global advertising to grow for the tenth consecutive year. The growth rate will slow down to +4.7% to reach $578 billion (+$26 billion) mostly due to the absence of major cyclical events. Excluding cyclical events, the 2018 growth would be +5.8% i.e. only marginally below 2018’s growth rate (+6.1%). The lack of cyclical events will mostly affect offline media sales (-2.4% to 293 billion) while digital media sales will grow by +13%.
- The 2019 slowdown will mostly come from North America (declining from +7.4% in 2018 to +2.5% in 2019 due to the lack of cyclical events) and Western Europe (from +4.8% to +3.6% due to economic uncertainty) while emerging markets will only marginally slow down (from +11% to +9%).
10 US FINDINGS
- In the US, media owners net advertising sales (NAR) grew by +7.5% in 2018 to reach $208 billion, a new all-time high. Neutralizing the estimated incremental advertising spending generated around cyclical even-year events (Winter Olympics, FIFA World Cup, Midterm Elections), 2018’s underlying growth would have been +5.3%, an acceleration compared to 2017 (+4.9%). MAGNA expects advertising growth to continue in 2019 albeit at a slower pace: +4.5% (excluding cyclical events).
- Cyclical events generated an estimated $5.1bn of incremental advertising dollars in 2018, an all-time high. More than four billion came from midterm campaigns (+43% vs 2014), including $3.1bn for local television (+28% vs the previous midterms 2014, +6% vs 2016), $460m for direct mail (+15%), $150m for radio and $20m for OOH media. This cycle was the first-ever to generate massive spending for digital media, with an estimated $175m for digital video (Youtube, Hulu, etc.), and at least $400m for social media (Facebook, Twitter etc.) representing approx. 1% of total annual revenues for both.
- Cyclical sports events (Winter Olympics and the FIFA World Cup), generated $850m of incremental revenues for national TV; this was down -2% vs 2014 due to poor time zones (South Korea, Russia), declining audiences, and the absence of US athletes (the US soccer team didn’t qualify and NHL stars didn’t participate).
- The main drivers of 2018 growth were the strong economic environment, retail sales and business confidence that prompted most industries and most brands to increase their marketing and advertising spending in 2018: Finance, Pharma, Food & Beverage and Technology increased advertising spend by +10% or more. Retail and Personal Care were up too, while Automotive, Movies, Restaurants and Telecoms reduced ad budgets.
- Digital advertising continued to show impressive growth in 2018: paid search advertising grew by +16%, social media ad sales grew by +33%, and online video ad sales by +26%. Overall digital ad sales grew by almost 17% while linear ad sales (television, radio, print, out-of-home) were essentially flat (-1%) including cyclical events (-5% excluding cyclical events).
- Digital advertising reached several milestones in 2018: revenues passed the $100bn mark ($107 billion), and account for half of total US advertising sales for the first time (51.5% exactly).
- Mobile advertising (ad sales generated through smartphone impressions and clicks) grew by +31% this year to reach $71bn, which is now more than television and twice as much as desktop-based revenues, reflecting the ever-growing role smartphones have taken in our lives. Meanwhile, desktop-based ad sales declined by -4% hit by lower consumption and by ad blocking.
- National television ad sales were up +1% t0 $43 billion thanks to cyclical effects (down -1% excluding CE). Local TV ad sales were grew +11% (-4% when stripping out political spend). Print ad sales were down -17% to $15 billion (-10% including digital ad sales). Linear radio ad sales were down -4% to $13.4 billion, as local radio pricing continues to decline, while national (network) radio performed better; including digital ad sales (+5%), total audio advertising was still down -3%. Out-Of-Home had a strong year, with advertising sales growing by +3.4% to $7.4 billion.
- With the macro-economic environment forecast to remain strong in 2019 (real GDP growth +2.7% according to the Philadelphia Fed’s survey of economic forecasters), MAGNA anticipates that 2019 may be the tenth consecutive year of growth for the US advertising market (2010-2019).
- Total advertising revenue growth will grow +2.4%. The apparent slowdown will mostly come from the lack of cyclical events. Excluding the impact of cyclical events in 2018 and 2017, underlying ad spend will grow by +4.5% in 2019, i.e. a moderate slowdown compared to an exceptionally strong 2018 (+5.3%). Digital ad sales will grow by +12% while linear ad sales will shrink by -4%.