The global ad market has bounced back faster than expected from the severe slump of the second quarter, according to a revised ad forecast from Zenith. Total worldwide ad billings are forecast to shrink by 7.5% to $587 billion in 2020, a big improvement over the 9.1% decline the ad agency giant forecast in July. The numbers look better in North America, which has fared better than any other region.
Zenith is the second Madison Ave. giant to proclaim 2020’s decline won’t be as bad as originally thought. Last week GroupM said the downturn in the U.S. will be about 9%, an upward revision from -13% which the agency holding company called for back in June.
Back to the new outlook from Zenith, global ad spend is on track to reach $620 billion in 2021, a 5.6% increase over COVID-battered 2020, but still below the $634 billion that advertisers invested in 2019. The industry still has some choppy waters to navigate and won’t recover until pre-pandemic levels until 2022 when it will hit $652 billion, up 5.2% from 2021 and exceeding 2019 by $18 billion. However 2022’s global total will be about $70 billion short of what it would have been if it stayed on its pre-pandemic track.
The numbers look better in North America, which has fared better than any other region and is forecast to shrink by 5.3% in 2020, cushioned by record-setting political advertising in the run-up to the U.S. Presidential election. But that makes for a tougher comp for 2021, when Zenith forecasts just 3.3% growth. North America will return to pre-pandemic spending levels in 2022 when ad spend will jump 4.5%.
“The global ad market has been recovering from its Q2 nadir throughout the rest of this year,” said Jonathan Barnard, Zenith’s Head of Forecasting. “The prospect of multiple effective vaccines gives us confidence that ad spend growth will continue in 2021 and beyond, returning the market to 2019 levels in 2022.”
This year’s dramatic increase in ecommerce sales accelerated the ongoing shift of ad dollars to digital and Zenith is the latest to report that it surpassed traditional media in ad share in 2020, rising to 52% from 48% in 2019. While overall ad spend fell, digital eked out a 1.4% increase in 2020. “The pandemic has forced brands to step up their digital transformation, as ecommerce has proved a vital tool for maintaining relationships with existing customers, mitigating the loss of in-store sales, and even finding new customers,” the forecasts says. That’s caused brands to step up their digital ad spending to drive traffic to their own ecommerce platforms as well as to those of retail partners. To pull this off, advertisers relied on search and social media, which jumped 8% and 14%, respectively.
Like many changes sped up by the health crisis, ecommerce sales aren’t expected to cool down once the world begins to recover from the pandemic. “Now that brands have proved the value of digital transformation under stress, they are likely to press ahead with it enthusiastically, devoting even more of their budgets to digital advertising,” the forecast says, calling from digital advertising to account for 58% of global ad spend by 2023.
In other findings, Zenith says advertising on connected TV is compensating for the rapid rise of Netflix and other streaming video on demand platforms that shun advertising. Between January and April 2020, the reach of SVOD services on connected TV in the U.S. rose by 5%, but the reach of ad-funded video on demand (AVOD) services rose by 9% to 58.5 million households, or 48% of the total. As it continues to grow over the next few years it will counterbalance the loss of audiences to SVOD and help fuel an average of 8.4% annual growth in online video ad spend between 2020 and 2023.
Another major trend to surface in the Zenith forecast is the expansion of retailer media in which giants like Amazon, Walmart and CVS sell display or search ads on the their retail platforms, essentially creating their own media ad networks . Functioning more like in-store displays than traditional advertising, brands commonly pay for it from commercial budgets set aside for negotiating with retailers, rather than from marketing budgets.While China leads the world in retailer media, advertisers spent $35 billion on retail marketing globally in 2021 and that will surge by 46% to $51 billion in 2020.