Social media advertising will thus grow from 16 percent of total Internet advertising in 2016 to 20 percent in 2019. With annual growth rates of 20 percent, social media advertising will thus be only 1 percent behind newspaper advertising in 2019 ($50.2 billion for social media versus $50.7 billion for newspapers). By 2020, social media will already be unchallenged in front.
"Social media advertising will also see the highest growth rates in Germany in the medium term," says Dirk Lux, CEO Zenith. "Social media is close to the content, perfectly integrated and always there thanks to mobile. For the digital advertising market, social media is certainly the growth engine with the greatest future potential."
Social media platforms have benefited from the rapid adoption of mobile technologies and their integration into our everyday lives. For many users, social media is now not only the hub of their social lives, it is also their most important source of information. Social media advertising merges seamlessly with newsfeeds, making it much more effective than ads that are perceived as annoying, especially on mobile devices.
Online video overtakes radio
With growth rates of 18 percent annually, advertising investment in online video is growing almost as fast as that in social media and will total $35.4 billion globally in 2019, just above radio advertising spend ($35.0 billion). Online video advertising is benefiting from the increasing penetration of mobile devices, as well as mobile access to fast data connections and improved handset displays. More brands are using online video to complement television advertising, but few see online video as a complete replacement for television advertising. Even in 2019, online video advertising will account for less than one-fifth (18 percent) of television advertising.
"In Germany, the growth of online video is mainly driven by mobile usage. Online video has found its permanent place in advertisers' media plans, not least because mobile usage means that online video can be increasingly tailored to the usage situation," explains Lux. "In this country, growth will continue to depend on the technical development of mobile devices and will weaken somewhat in the medium term."
Growth despite political risks
For 2017, Zenith forecasts a 4.4 percent increase in global advertising spend, the same growth as in 2016. This is a very strong performance, given that the unexpected outcome of the Brexit vote in the UK and the presidential election in the USA have increased political uncertainty and the risk of trade restrictions. 2017 also compares favorably with 2016, which benefited significantly in terms of advertising spend from the major events that take place every four years (US elections, Summer Olympics and European Football Championship).
Zenith expects global advertising investment to continue to grow steadily beyond 2017, forecasting growth of 4.4 percent for 2018 and 4.1 percent for 2019. Global advertising investment has grown remarkably steadily between four and five percent annually since 2010, either on par with or just below global GDP growth. Prior to the financial crisis, the advertising market exaggeratedly reflected the state of the economy, meaning that ad spending grew faster during economic booms and also contracted faster during recessions, resulting in widely varying annual growth rates. Recently, however, the global advertising market appears to have entered a more stable growth phase.
Continued growth momentum in Asia and recovery in Eastern Europe support global growth
Stable growth in advertising investment is very unevenly distributed around the world. Against a backdrop of ongoing conflicts and low oil prices, advertising spending in the Middle East and North Africa is falling by 4.9 percent a year. In South America, growth is a meager 1.7 percent, as Argentina, Brazil, Ecuador and Venezuela are in economic crisis. Asia remains the growth engine. Although growth in China has leveled off significantly in recent years, it is still a handsome 7.0 percent annually, and as what is now the world's second-largest advertising market (behind the U.S.), that means many additional dollars every year. We expect China to contribute 25 percent to global advertising investment growth between 2016 and 2019. We also expect three other Asian markets - India, Indonesia and the Philippines - to grow at double-digit annual rates through 2019. These are substantial markets in the order of $3.5 billion (the Philippines) and $7.5 billion (India and Indonesia) in 2016. Together, these three markets will contribute 12 percent to global ad spend growth through 2019.
In several Eastern European markets - particularly Russia, Ukraine and Belarus - advertising investment suffered from the Ukraine conflict, the sanctions subsequently imposed between Russia, the USA and the EU, and the sharp fall in the price of oil. In these three markets, advertising spending fell by 12 percent in 2015, but a collapse was averted and in 2016 it recovered from lower baseline levels. We forecast these three markets to grow 8 percent in 2016 and 9 percent in 2017, contributing 2 percent to global ad spend growth between 2016 and 2019.
"Despite Brexit, rising uncertainty in the world and Trump's U.S. election success, the outlook for Germany remains fundamentally positive," Lux said. "Stability, employment, perceived calm in Europe and continued high purchasing power give companies a positive outlook for the next advertising year."