Rising inflation, flagging consumer confidence and uncertainty due to ongoing supply-chain issues have economists predicting a recession.
But, based on GroupM’s and Zenith’s midyear forecasts of the global ad market, the recession fears may be unfounded.
Still, after the record highs of 2021, ad spending will see a deceleration in 2022, due to the return to pre-pandemic trends, slowed growth in China and Eastern and Central Europe and the slowest growth quarter for ecommerce since 2019.
The global picture
GroupM expects that, even accounting for a 6.9% global average rate of inflation, real economic growth will be 3.5% this year.
The advertising industry is poised to grow faster than inflation: Zenith is predicting 8% growth in global ad spend in 2022 (including US political advertising), and GroupM is predicting 8.4% (excluding US political advertising).
However, these rates are down slightly from the 9.1% growth rate Zenith predicted and the 9.7% growth rate GroupM predicted at the end of 2021.
A major recalculation in China’s expected growth rate is driving lowered expectations. GroupM adjusted its predicted growth rate for China to 3.3%, a significant drop from the 10.2% it predicted in December 2021. That adjustment is primarily due to the reemergence of strict pandemic-related shutdowns and a legislative clampdown on private tutoring, which represented a major advertising vertical.
With China accounting for 20% of global ad spend in 2021, it’s not surprising that a deceleration there affected the global outlook.
Furthermore, the war in Ukraine will cause a 26% decline in Central and Eastern Europe, according to Zenith.
For the US, which represents 39% of global ad spend, Zenith predicts 6.7% growth for 2022, and GroupM predicts 10% growth. The US will add $33 billion in ad spend in 2022, or 58% of new ad dollars globally, according to Zenith.
And ad spend in India is poised to explode. Zenith predicts a 20.8% growth rate for 2022, and GroupM predicts India’s ad market will grow by 22.1%, driven largely by increased adoption of mobile devices.
Ecommerce cooldown
Ecommerce soared during the pandemic, but without pandemic-related restrictions on in-person shopping, ecommerce has cooled somewhat. Ecommerce retail sales grew by 6.7% in Q1 2022, the segment’s slowest quarter of growth since 2019, according to GroupM.
“We’re starting to see just how much growth, especially from last year, was built on consumer purchases in ecommerce,” said GroupM global director of business intelligence Kate Scott-Dawkins. But the gap in ecommerce product sales is being filled by the post-pandemic return of service advertisers in markets like travel, she added.
The continued (but decelerated) rise of digital advertising
Digital ad spend will grow 11.5% in 2022, according to GroupM. That’s down from the astronomical 31.2% growth rate GroupM predicted in 2021.
But “deceleration is not the same thing as decline,” said GroupM global president of business intelligence Brian Wieser.
“Deceleration was inevitable,” Wieser said. “We were seeing it in 2019, but the pandemic delayed [the deceleration], in the sense that the pandemic was a catalyst for growth that went way beyond what was otherwise possible.”
Zenith predicts a 16.6% growth rate in 2022 for all internet advertising, down from its prediction of 33.7% growth for 2021.
Pure-play digital ad platforms will grow by 11.5% this year, according to GroupM. That’s down from its previous prediction of 13.5%. But pure-play digital represents 67% of total ad spend in 2022 and will grow to 73% by 2027, GroupM predicts.
Digital media will draw 62% of ad budgets in 2022 and 65% by 2024, according to Zenith.
Advertisers continue to reduce their spending on TV in favor of digital channels in an attempt to court younger, digital-native audiences. Rising prices for TV advertising relative to other channels isn’t helping; Zenith expects the global average cost of TV ads to rise by 11% to 13%, compared to 7% for online video, 3% for social media and digital display and 4% for out-of-home (OOH) and radio.
Online video will grow 15.4% a year on average between 2021 and 2024, making it the fastest-growing channel over that span, according to Zenith. The channel slightly outpaces social media, which Zenith predicts will grow 15.1% a year from 2021 and 2024.
OOH is also expected to be a hot category, although it is still working its way back to pre-pandemic levels. Zenith predicts an average growth rate of 8% in OOH over the next three years, but GroupM predicts a more moderate 3.6% average growth rate over the same period.
