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Global ad market to grow at 5.3% in 2014: ZenithOptimedia

MUMBAI: The rapid development of digital advertising technology will help the global advertising market grow 5.3 per cent in 2014, up from 3.9 per cent in 2013. The growth will remain strong over the next two years, staying at 5.3 per cent in 2015 and rising to 5.9 per cent in 2016.

According to ZenithOptimedia’s new ‘Advertising Expenditure Forecasts’, global ad spend will grow by 5.3 per cent to reach $523 billion over the course of this year. Internet advertising is forecast to expand by 17.1 per cent this year, as improving digital advertising technology makes internet advertising cheaper and more effective. This growth is being driven by a wider spectrum of companies than traditional media, including digital specialists, tech companies and direct advertisers.

New technology is improving most areas of internet advertising. Improved advertising formats are making internet display more interactive and attention-grabbing, with consumers more likely to view, remember and interact with them than older formats. Meanwhile, programmatic buying is evolving to allow more sophisticated and efficient targeting of display audiences, and is becoming better at delivering premium, brand-building experiences.

ZenithOptimedia forecasts traditional display advertising to grow at an average of 15.8 per cent a year between 2013 and 2016, up from 12.3 per cent a year between 2010 and 2013. Social media display is growing much faster—at an average of 29.9 per cent a year between 2013 and 2016—with advertisers exploiting the explosion of mobile social media use and the ability to target across desktop and mobile.

As online video extends to smartphones, tablets, gaming consoles and connected TV sets, it is providing advertisers with a wealth of new opportunities to connect with consumers: the report forecasts online video advertising to grow by 24.2% a year between 2013 and 2016.

Paid search is being boosted by the adoption of tools that have proved themselves in display, making it more addressable, as platforms give advertisers more control over where, when and to whom their ads are exposed, and also allowing the retargeting of consumers who have previously visited an advertiser’s website with custom copy. These improvements are expected to help paid search maintain an average growth rate of 14 per cent a year over the next three years, up marginally from 13.5 per cent over the previous three years.

ZenithOptimedia expects internet advertising to command 23.6 per cent of global advertising budgets this year, exceeding the combined share of newspapers and magazines (22.7 per cent) for the first time. By 2016 the internet is expected to account for 28.3 per cent of global ad spend, having narrowed the market share gap between itself and TV—the most dominant medium—from 15.9 percentage points to 9.9.

Mobile, the fastest-growing advertising segment: Mobile internet advertising (by which we mean all internet ads delivered to smartphones and tablets, whether display, classified or search, and including in-app ads) is by far the fastest-growing advertising segment. This growth is being driven by the rapid adoption of mobile technology by consumers and the introduction of better advertising formats that allow advertisers to engage users creatively, without interrupting their browsing as much as early formats.

This year mobile internet is expected to grow by 67 per cent—seven times faster than desktop internet—and to account for 20 per cent of all internet advertising. The agency forecasts mobile’s share of internet ad spend to rise to 25 per cent in 2015 and 30 per cent in 2016 as mobile devices continue to proliferate and diversify.

Mobile advertising is by far the largest contributor to global ad spend growth. It is projected to grow by $35 billion between 2013 and 2016, accounting for 42 per cent of all the extra ad spend added to the market, followed in distant second and third place by TV (30 per cent) and desktop internet (28 per cent) respectively.

Downgrade in Russia as tensions escalate: The global forecast for 2014—of 5.3 per cent growth—is fractionally below the 5.4 per cent growth forecast in June. The principle cause of the downgrade is the escalation of tensions between Russia and the West over the Ukraine crisis. The agency now forecasts Russia’s advertising market to grow just 1.7 per cent this year, down from the 6.9 per cent in June and 9 per cent in March. The agency still expects ad spend in Ukraine to shrink by 32.5 per cent this year as commercial activity remains severely disrupted.

Eurozone ad spend holds steady: Despite the recent disappointing economic news from the Eurozone—zero GDP growth in Q2 2014 and slowing manufacturing growth over the summer—the forecasts for Eurozone ad spend growth are stable at 0.9 per cent this year, marginally ahead of the 0.8 per cent forecast in June. Strong signs of recovery in some of the markets worst hit by the financial crisis—Ireland, Greece, Portugal and Spain, where the agency now forecasts 2.9 per cent growth this year, up from the 1.1 per cent forecast in June—have helped counterbalance the weakness elsewhere.

This has been especially visible in France, which the agency expects to shrink by 1.2 per cent in 2014, down from the previous forecast of 0.4 per cent decline. However, advertisers will be keeping a close eye on Eurozone economic activity, and unless the economy picks up in future the agency says that one can expect to see some downward revisions to advertising budgets towards the end of the year.

ZenithOptimedia CEO, Worldwide Steve King said, “Internet advertising is expanding rapidly as new technology makes it easier for advertisers to reach the right people at the right time with the right message, at an efficient price. The spread of ever more sophisticated mobile devices will help this expansion continue, sustaining steady growth in global ad spend for the next few years.”