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Magna Global Forecasts US$480 Bil. APAC Ad Spend In 2016

  • Strongest growth in six years
  • TV ad sales driven by to stronger pricing and major events
  • Digital media will surpass TV globally by 2017

Top Stories / Key Findings – Global

  • Globally, advertising revenues will grow by +5.4% in 2016, to $480 billion, and by +3.1% in 2017. That compares with +4.8% in our previous forecast (Dec. 2015).
  • Of the 72 markets analyzed by MAGNA Intelligence, 67 are expected to experience ad revenue growth this year and only five will decrease, compared to 15 last year.
  • The US (revised from +5.7% to +6.2%) and China (from +5.5% to +8.4%) are the biggest contributors to the higher 2016 growth forecast in this update are the.
  • The biggest downward forecast revision comes from Brazil (from +5.0% to +1.9%).
  • Major events will boost advertising sales, (US elections, UEFA Football tournament, Olympic Games, Copa America). Neutralizing the impact of those cyclical events, the global advertising market will still grow by +4% this year.
  • Neutralizing the impact of political and Olympic Games spending (a record $3.5 billion), 2016 ad growth would be +4.1% (similar to last year) and will slow down to +3.4% in 2017 (+1.2% if factoring the absence of cyclical events).

Regional comparison

  • US advertising sales will grow by +6.2% in 2015 to $178 billion. This is the strongest growth rate since 2010.
  • US digital media sales will equal TV sales for the first time ever (both $68 billion, a market share of 38.5%).
  • Western Europe advertising revenues will grow by +3.8% to $100 billion, helped by the UEFA football event; Eastern Europe advertising revenues will increase by +5.3% this year to $16 billion, as Russia recovers.
  • Asia Pacific media sales will reach $139 billion (+6%) while recession-stricken Latam will grow by only +3.3% (previous forecast +5%) which represents a decline in real terms, considering high economic inflation in the region.

Media based ad spend

  • Digital media advertising sales will grow +15%, primarily driven by mobile advertising (+44%), video formats (+35%) and social formats (+43%) while search remain robust (+14%) and banner formats sales will decline (-6%) due to ad blocking and the competition of other formats.
  • Traditional media ad sales will be flat (+1%). Global TV ad sales will grow by +4.4% to $179 billion and out-of-home media by +3.8% to $31 billion). Radio ad revenues will be flat (-0.2% at $32 billion) and print media advertising revenues will continue their long term decline (-8% to $70 billion).
  • Digital media sales will reach $192 billion (a 39% market share) by the end of 2017, surpassing TV ($178 billion, 36%) to become the number one media category globally.
  • Mobile advertising will account for 42% of total digital ads by the end 2016 and near 50% by the end of 2017.
  • Linear television advertising sales (+4.4%) will record their strongest growth since 2012, boosted by cyclical events and strong pricing offsetting the continued erosion of viewing.

Global Overview

Globally, media owner advertising revenues will grow by +5.4% in 2016, to $480 billion, and by 3.1% in 2017. That compares with +4.8% and +3.2% in the December 2015 forecast.

This year’s events (US elections, UEFA Football championship in Europe, Summer Olympics in Brazil, Copa America in the US) will generate incremental advertising spending and thus boost media owner ad revenues compared to 2015 (when no such events took place). Neutralizing the impact of those cyclical events in 2015, 2016 and 2017, the global ad market will grow by approximately +4% in both 2015 and 2016, which suggest no significant acceleration in the underlying ad demand beyond the cyclical drivers, as the economic environment remains uncertain.

Our +5.4% prediction for global growth in 2016 is the result of digital media ad sales growing +15% while traditional media ad sales will be flat (+1%). The only traditional media category to see increased ad sales will be television (+4.4% at $179 billion) and out-of-home media (OOH) (+3.8% at $31 billion). Radio will be flat (-0.2% at $32 billion) and print media ad revenues will continue their long term decline (-8% to $70 billion).

Digital media advertising sales will increase by +15% to $170 billion globally this year, driven by mobile advertising (+44%), video formats (+35%) and social formats (+43%) while search remains robust (+14%) and banner format sales will decline (-6%) due to ad blocking and the competition of other formats. Digital media ad sales will reach $192 billion (a 39% market share) by the end of 2017, surpassing TV ($178 billion, 36%) to become the number one media category globally. Mobile advertising will accounts for 42% of total digital advertising by the end of 2016 and will reach approach 50% by the end of 2017, following the rapid shift in digital media usage and planning strategies.

Television advertising sales are predicted to increase by +4.4% this year (to $179 billion), of which approximately 2% is due to the cyclical events of 2016. Above and before the direct impact of those events, television sales have been strong in many large markets in the first quarter of 2016 (US, UK, France, Italy, Germany etc.) as an increasing CPM inflation is offsetting the erosion of ratings.

Of the 72 markets analyzed by MAGNA Intelligence in this update, 67 are forecast to experience ad revenue growth this year and only five (Singapore, Finland, Ecuador, Kazakhstan, Hong Kong) will a decrease, compared to 15 last year. The biggest contributors to the higher 2016 forecast are the US (from +5.7% to +6.2%, including cyclical events) and China (from +5.5% to +8.4%). The biggest negative revision comes from Brazil were a deep economic recession is aggravated by political uncertainty (from +5.0% to +1.9%).

In the US, media owner advertising sales will grow by an estimated +6.2% in 2016 to $178 billion, and will grow again by +1.2% in 2017. This will be the strongest annual growth since 2010 (+6.6%). Neutralizing the estimated impact of even-year events (expected to bring a record incremental $3.5 billion, mostly going to television), the 2016 growth would have been +4.1% (similar to last year) and will slow down to +3.4% in 2017. Digital media will equal TV ad sales for the first time ever (both $68 billion, a market share of 38.5%).

Western Europe advertising revenues will grow by +3.8% in 2016 to reach nearly $100 billion, as France and Italy finally join UK and Spain to show some positive growth. Regional growth will then slow down to +2.2% in 2017. In Central and Eastern Europe, ad revenues are predicted to increase by +5.3% in 2016 (to $16 billion) and then by +4.8% in 2017. In Asia Pacific, media owner ad sales are forecast to increase by an estimated +6% this year (to $139 billion) and by +4.9% next year.

The weakest region this year will be Latin America, where the slowdown in ad sales, started last year, proves longer and deeper than expected. This is mostly caused by an economic environment that gradually worsened in the second half of 2015, and then aggravated by the political crisis in Brazil this year. The Summer Olympics, hosted by Brazil this year, won’t be enough to offset the advertising slowdown in the region. Ad sales will grow by +3.3% to $22.6 billion (previous forecast: +5.4%) which means a decline in real terms, as economic inflation is typically much higher in most markets.

According to Vincent Letang, EVP, Director of Global Forecasting at MAGNA GLOBAL and author of the report:

“Advertising sales were dynamic in the first quarter of 2016, for both television and digital media, in many large markets (including US, UK, Germany, Italy and France). The mixed economic outlook and political uncertainty (Brazil, Brexit) is likely to gradually reduce the level of growth in the rest of the year and in 2017, but the full-year 2016 global growth (forecast at +5.4%) should remain the strongest in six years (since +8.5% in 2010) thanks to cyclical events and stronger television pricing.”

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Source: Magna Global