$16bn ad spend barrier expected to be broken in 2017, IPG Mediabrands predicts and Dentsu Aegis bullish for 2018

Growth in advertising expenditure in Australia for 2017 is predicted to nearly halve compared to the previous year but IPG Mediabrands still expects total spending to break through the $16b barrier for the first time.

Victor Corones said ongoing economic progress is sustaining the market

The report by IPG’s media intelligence and investment division, Magna, forecasts overall growth will slow from 7.8% in 2016 to 4.7% this year.

Growth continues to be driven by the digital sector which is predicted to rise 13.5% to $8.4b and follows on from last year’s jump of 24%.

Digital growth will be underpinned by the the video sector which Magna expects to see leap 38% to more than $1b.

Social media spending will also continue to be a major contributor to the expansion of digital, with an expected rise of 20% driven largely by 26% growth in mobile social advertising spend as the desktop sector begins to stagnate.

Victor Corones, managing director of Magna Australia, said even as growth slowed, the market was still being sustained by Australia’s constant economic progress.

“The continued strength of Australian digital spend remains impressive given the almost total penetration of internet access and the already high 53% share of digital as a portion of total campaign budgets,” Corones said.

TV in Australia is predicted to contract 3.2% in 2017 without the drivers of a federal election and the Olympics, with subscription TV back 4.5% and broadcast back 3%.

Predictions for newspaper advertising remain dire, with Magna expecting shrinkage of 16%, while magazines will slip 6%.

On the positive side, out of home including cinema is expected to rise 7.2% and radio will lift 3.5%.

On the back of growth in digital in Australia, the APAC region is expected to be the second-largest region in the world behind North America with digital surpassing TV for the first time.

Regional spending on TV is predicted to capture a share of 37.8% of spending ahead of TV’s share of 37.7%. Overall growth in TV will continue at 2.2%, reaching $59b for 2017 – but the sector will continue to lose share.

Both print and magazine advertising sales will continue to shrink across the region, down 7% for newspapers and 9% for magazines, the predictions say.

Magna predicts global advertising revenues will lift by 3.7% to US$504b.

The IPG Mediabrands global prediction is in line with rival Dentsu Aegis which is predicting a slip in growth to 3.8% on the basis of a more cautious economic outlook.

However, with the FIFA World Cup, Winter Olympics in Korea and Congressional elections in the US, the company predicts global growth in 2018 will rise to 4.3%.

The company also expects digital to overtake TV in global share for the first time in 2018.

Digital’s share of total media spend is predicted to reach 37.6% in 2018 (up from 34.8% in 2017), versus 35.9% for television (down from 37.1% in 2017), amounting to a total value of US$215.8bn.

The network predicts growth in Australia in 2017 of 4.1%, rising to 4.8% in 2018.

Dentsu Aegis boss Jerry Buhlmann said digital has to be top of mind for advertisers

Dentsu Aegis Network CEO Jerry Buhlmann said the moment had been reached when advertiser thinking had to shift.

“We are reaching a tipping point in ad spend now as digital overtakes television, mobile overtakes desktop and paid search overtakes print,” Buhlmann said.

“Digital and data must now be the default settings for advertisers. Evolving to people-based marketing rather than audience-based marketing and using data to increase addressability is essential for brands to manage tighter conditions in 2017 while positioning themselves for future growth.”


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