GLOBAL - WPP’s GroupM has trimmed its global ad expenditure forecast for 2016 due to China’s slowdown to a ‘new normal’ and expects the US to overtake China as the strongest driver of ad growth.
GroupM’s This Year, Next Year report also predicts APAC year-over-year growth will reach 5.3 percent in 2016 and 5.9 percent in 2017. Globally, GroupM revised its forecast for 2016 ad growth down from 4.5 percent to 4.0 percent ($22 billion to $20.5 billion), due to the economic restructuring in China and the subsequent slowdown offsetting economic recovery elsewhere. Global marketing spend in 2017 will surpass $1 trillion for the first time, with digital media consumption continuing to play a key role in ad growth.
The report predicts YOY ad-spending growth for North Asia will be 5.6 percent in 2016 and 6.3 percent in 2017, while Asean will grow at 8.1 percent in 2016 and 8.4 percent in 2017. (North Asia includes China, Hong Kong, Japan, South Korea and Taiwan. Asean includes Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.)
China: Slumping but still strong
With weakening consumer demand, China ad growth has been revised downward from 9.1 percent to 6.6 percent for 2016, and the initial forecast for 2017 is 7.0 percent. Despite a slump from double-digit growth to a “new normal”—the CCP now targets GDP growth between 6.5 and 7 percent—GroupM expects advertising in China to have ample fundamental support from persistent consumer confidence and rising expectations, as well as vigorous urbanisation.
Aside from these macro-indicators, GroupM believes this year’s big sports events (European football and the Olympic Games) provide sustained support to ad growth in China. Looking at individual media shows a trend that conforms to the global, with traditional print media (newspaper and magazine) losing salience, falling 54.1 percent and 28.3 percent, respectively, in 2016 and predicted to fall by 51.5 percent and 27.0 percent, respectively in 2017. Internet, including online video and online radio platforms, rises by 27.4 percent in 2016 and 20.0 percent in 2017.
India: On track for $10 billion
In the long run, supported by stabilising finances, sustained urban demand and important reforms, India’s current trajectory puts it on track to become the tenth $10-billion-plus ad market in 2018. It is also the fastest-growing larger ad economy at a forecast annual run-rate of 14 to 15 percent. In 2016, digital communication, e-commerce and premiumisation, along with stable 8 to 12 percent auto growth and 24 percent public sector wage growth, should offset the struggling, still-fragile banking sector and propel ad spending. GroupM sees stronger FMCG competition, higher rural penetration and bigger premium product portfolios fueling media investment. A recovering banking sector and successful macroeconomic reforms should see domestic demand and investment improve also. Media-wise, TV and radio continue to grow with both TV and auto (cars are where most people consume radio) penetration still relatively low. Print is under pressure, with magazines falling by 14.8 percent in 2016 and 17.4 percent in 2017, while digital and cinema will see strong growth.
Topping a trillion
With global ad volume for 2017 expected to hit $552 billion, adding in other marketing services should take total marketing spend in 2017 above $1 trillion for the first time. This may be attributed to the growth of digital, which will account for 99 percent of all net ad growth in 2016, comprising 31 percent of investment this year and precisely one-third next year, GroupM reported.