Zenith: Small Business Drives Global Ad Spend Growth And The Duopoly Reaps The Rewards

Small businesses in the United States are driving ad spend growth globally, thanks to self-serve and cost-efficient ad buying tools from Facebook and Google.

While local businesses traditionally use local TV and radio, producing a commercial can cost thousands of dollars. And even though some DTC brands are targeting on OTT, production for those spots can also be cost prohibitive.

The social giants, however, are offering a nice mix of precise targeting at an affordable cost.

“Local businesses are able to target very effectively on online platforms,” said Jonathan Barnard, head of forecasting at Zenith. “You can do a decent local online campaign with hundreds of dollars.”

Social media will grow 20% to surpass print in 2019 as the third-largest advertising channel with 13% market share, Zenith predicts. Of course, most of that spend goes to Facebook and Google.

“The [platform] giants are really dominating spend,” Barnard said. “It is difficult for any publisher to capture market share online, and will continue to be for some time.”

Small businesses entering the ad market are concentrated in the United States, which is why Zenith predicts it will contribute 48% of new global ad dollars in 2019.

That situation is rare in a market as large as the United States, Barnard said. “It’s tended to be smaller, faster-growing markets that supplied more ad dollars,” he said.

While small businesses haven’t yet begun advertising heavily on social media outside of the United States, Zenith expects the same dynamic to take off in other markets soon.

“We are going to see an increasing importance of small brands in the advertising market,” Barnard said.

Global uncertainties

Zenith downgraded its global ad spend forecast for 2019 from 4.6% YoY growth in June to 4.4%, reaching $640 billion. In comparison, Magna revised its 2019 forecast upward to 6.3% in September from 5.1% in June.

The downgrade at Zenith is partially because it had upgraded its 2018 growth forecast from 6.4% YoY growth to 6.7%, leaving 2019 to face tougher comps, Barnard said. Poor economic results in Europe and Asia, which led to weaker consumer spending and advertiser demand, also drove the downgrade.

But in the United States, despite similar economic and political uncertainties, consumer spending remains high, thanks to a robust job market and solid economy.

“If there were a reversal in the jobs numbers, we’d probably see reversal in that trend,” Barnard said.

Zenith expects global ad spend growth to fall behind GDP through 2021, after outpacing global economic growth in 2018. That could be due to advertisers spending more money on their owned media platforms and for digital transformation work than paid advertising channels.

“A lot of this activity just isn’t visible in the same way advertising is,” Barnard said.

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