GroupM: marketing services spend to pass $1tn as US and India lead media growth

WPP’s GroupM has trimmed its 2016 global ad expenditure forecast and produced its initial outlook for 2017. The 2017 ad volume prediction of $552 billion (+ 4.3 per cent), when combined with other marketing services, pushes total marketing services expenditures worldwide past the $1 trillion threshold for first time. However, slowing growth in China and Brazil this year drive GroupM to revise down their 2016 growth estimate to 4.0 per cent from the 4.5 per cent earlier predicted, (net new investment of $22bn trimmed to $20.5B).

GroupM China reports what it calls a “new normal.” 2016 growth is now forecast at 6.6 per cent, revised downward from 9.1 per cent as the slowdown in fixed investment and profits affects consumer demand. The initial advertising growth estimate for China in 2017 is 7.0 per cent. These estimates keep China among the top growing large markets, with ample fundamental support tied to growing urbanization and consumer confidence though China no longer boasts the double-digit growth rates of recent years.

After a slow growth 2015, the communications market in Brazil is feeling the effects of economic crisis in 2016, but is still hopeful of ending the year positive for growth at one percent. Previous hopes for seven per cent growth in 2016 are dashed by Brazil’s continuing economic recession, increasing unemployment (topping ten per cent), and political turmoil.

With the slowing of China GroupM says that the US will be the leading contributor of global ad growth this year, assuming a mantle China has held since 2007. GroupM’s US advertising growth estimate for 2016 is revised up from 2.7 per cent to 3.1 per cent, driven primarily by a healthier TV marketplace that will grow 3.4 per cent in 2016 instead of the 2.3 per cent predicted earlier. Political, CPG and pharmaceutical categories are key contributors to TV’s strength.
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India remains the fastest-growing larger economy at a forecast annual rate of 14 per cent to 15 per cent in 2016 and 2017. India is on track to become the tenth biggest advertising market with greater than $10bn in annual investment in 2018.

Russian ad expenditure is growing fast after a reverse in 2015. GroupM forecasts 7.8 per cent growth in 2016 and 9.4 per cent in 2017.

Regarding the UK’s ‘Brexit’ vote to quit the European Union GroupM’s futures director Adam Smith says: “At this time there is no tangible evidence of a Brexit effect in macro indicators nor budgeting decisions. However, in the next six months to a year, it is likely companies will invest less. Job creation, wage growth and productivity will be lower than it otherwise might have been.

“This is a difference of degree, not magnitude. There is no evidence of a Brexit-driven recession at the time of writing and though some have deferred 2016 advertising investments, worst-case we still see that UK advertising growth will reach 4.5 per cent this year, propelled exclusively by the growth of digital. Our base case remains 6.3 per cent, which we will revise as usual in November.”

Globally the growth of digital continues to be high but it is moderating from 18 per cent in 2015 to 14 per cent in 2016 and 12 per cent in 2017. This is to be expected as markets like China see digital pass 50 per cent of media investment. Digital will still account for 99 per cent of all net ad growth in 2016 and comprise 31 per cent of investment this year and one third next year. Print media continues to lose the most share to online while TV remains resilient.

These forecasts are published in GroupM’s biannual worldwide media and marketing forecast report This Year Next Year.

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