Zenith says ad spend to grow by 5% in 2022
Australia’s estimated ad spend will grow by 5%, according to Zenith’s ad spend forecasts which also predicts global ad spend to grow by 9.1% in 2022.
Locally, Zenith’s national head of investment, Elizabeth Baker said total ad spend recovery has been rapid, with consumer confidence relatively stable.
“Digital and TV ad spend recovery has been rapid, and recent lockdown restrictions in Australia has not appeared to dampen growth. Consumer confidence is relatively stable, despite the slight drop over the last weekend of November, following omicron news and international border closure announcements. However, retail outlook appears to be healthy with major household item purchase intent remaining strong.”
Baker continued: “The Tokyo Olympics provided a strong cash injection in Q3 advertising investment. Whilst we would typically see a contraction of revenues in the year following the Summer Olympics, the combination of premium sporting events, The Ashes, Winter Olympics and Commonwealth Games, with a Federal Election in Q2 2022 as well as some state elections should facilitate ad spend stability, especially across TV and digital.”
COVID-19 setbacks have extended the period of heightened digital transformation. The pandemic has thoroughly disrupted shopping habits. Many consumers who would prefer to browse and purchase in person are shopping online by necessity. Businesses have responded by investing more than would otherwise have been justifiable in new technology, infrastructure, organisational change – and advertising. This includes brand advertising to promote e-commerce platforms, performance advertising to direct traffic to them, and advertising within these platforms (“retailer media advertising”) to promote specific products, all of which have surged.
Over the last six months it has become clear that booster shots are necessary to maintain the effectiveness of vaccines, that the fully vaccinated are able to pass on infections quite readily, and that substantial pockets of the population are unwilling to be vaccinated at all. Progress towards containing COVID-19 has been slower than expected, and consumers have been less willing to resume in-person shopping. Businesses have continued their heightened investment in digital transformation, during a period in which many expected to ease back as consumers returned to shops.
Digital advertising has therefore been stronger in the second half of this year than previously expected. Zenith now estimates that digital advertising will grow by 25% year-on-year in 2021, compared to the 19% estimated in the previous forecast, published in July.
Zenith expects digital transformation to slow down, but not go into reverse, as the pandemic eases in 2022 and beyond. The pandemic has accelerated trends that were already fundamentally reshaping the economy, and will continue to do so. Zenith forecasts 14% growth in global digital ad spend in 2022, up from the previous forecast of 10%, followed by 9% growth in 2023 and 10% in 2024.
Zenith’s national head of digital & data, Joshua Lee added: “In Australia, digital ad spend has bounced back and forecasted to increase by 21% to $11.2 billion from last year. With double-digit growth across all channels and online retail sales growing by 25%, the retail category will continue to thrive as brands invest in digital transformation. Accelerating a direct-to-consumer and first-party data strategy will require brands to move away from just the transactional and include experiential customer experiences across paid and owned channels. This will create more positive brand and online shopping experiences, reinforcing e-commerce behaviours and loyalty well after the pandemic.
“For media owners, Australia’s largest publishers are in a race to build out their own identifiers before third-party cookies depreciate in 2023. Data ownership through digital transformation will help steal share from the walled gardens where Google, Facebook and YouTube currently make up more than 80% of Australia’s digital advertising market,” he said.
Advertising is contributing more to the global economy. This structural change in the economy means that advertising is playing a greater role in driving sales growth through ecommerce. In particular it has sparked a surge in retailer media advertising: display or search advertising that appear on ecommerce platforms.
By 2024 retailer media ad spend is expected to reach A$204 billion (US$143 billion), and 27% of display and search. Much of this will be incremental to existing ad expenditure, coming from commercial budgets previously used to negotiate for shelf space in bricks-and-mortar stores.
The rise of the digital economy has also stimulated other forms of advertising, including brand campaigns on television and out-of-home, where digital brands are now prominent. The share of global GDP contributed by advertising had been rising steadily before the pandemic, from 0.72% in 2014 to 0.75% in 2019. After the step-change in digital media consumption and ecommerce last year, it is forecast to reach 0.77% in 2021 and 0.80% by 2024. This will be the biggest rise in advertising’s share of GDP since the late 1990s.
Zenith expects social media ad spend to reach A$252 billion (US$177 billion) in 2022, overtaking television at A$248 billion (US$174 billion). Social media ad spend will rise to A$321 billion (US$225 billion) by 2024, when it will account for 26.5% of all advertising, followed by paid search at 22.5% and television at 21.0%.
Digital advertising as a whole will exceed 60% of global ad spend for the first time in 2022, reaching 61.5% of total expenditure, and will increase its share to 65.1% by 2024.
Brands need to make smart use of online video to mitigate television inflation. Television advertising remains the easiest route to mass-audience brand awareness, despite years of audience losses to digital media. Brands’ reliance on television is fuelling rapid media inflation, which will continue even after the comparison with 2020 has passed. Zenith forecasts the cost of television advertising to rise by 11% in 2022, compared to 4% for out-of-home, 3% for digital display, 2% for radio and zero for print. Brands will have to confront their dependence on a medium that consistently delivers smaller audiences for higher prices.
Zenith’s head of forecasting, Jonathan Barnard commented: “As consumers rely ever more on digital technology to connect and entertain them, and to inspire and fulfil their purchases, advertising is playing a greater role in driving sales and brand growth. Over the next three years we expect the ad market to achieve its highest rate of sustained growth since 2000.”
Got a tip?
topics
ad spend 2022
digital transformation
Elizabeth Baker
forecast
Jonathan Barnard
Joshua Lee
Publicis Groupe
Zenith
Have your say