• by Jack Loechner , Staff Writer @mp_research, April 10, 2015

According to the new Advertising Expenditure Forecasts from ZenithOptimedia, global adspend will grow 4.4% to reach $544 Billion US in 2015, and will accelerate to 5.3% growth in 2016, boosted by the 2016 Summer Olympics in Rio and the US Presidential elections. Adspend will then slow down slightly in the absence of these events, growing 4.8% in 2017. These forecasts for each year are above the average annual growth rate for the last 20 years (4.2%), and well ahead of the average for the last 10 years (2.8%).

Online video is the fastest-growing advertising category thanks to the explosion of mobile video consumption and the spread of internet-connected devices, such as smart TVs and games consoles. Smartphones have bigger and better displays, and transmission technologies like 4G are improving connection speeds, making it possible for consumers to watch high-quality video content wherever and whenever they choose.

The report estimates that global online video grew 34% to $10.9 Billion US in 2014, and forecasted in the US to grow at an average of 29% a year to reach $23.3 Billion US in US 2017.

According to the Ooyala Global Video Index, mobile devices accounted for 34% of all online video plays in Q4 2014, up from 17% a year earlier, says the report. Several other factors are contributing to online video growth:

• measurement agencies are investing in research to track consumers’ exposure to video ads across desktop computers, tablets and television screens
• the main social media platforms are all developing their video products
• more online video is being sold by programmatic buying, providing advertisers with more control and better value

Worldwide, the conflict in Ukraine has severely disrupted the domestic economy in Eastern Europe, while Russia has suffered from sanctions imposed by the US and the EU, exacerbated by a sharp drop in the price of oil, which accounts for 70% of Russia’s exports, and the devaluation of the Ukrainian and Russian currencies. International advertisers have responded by rapidly reducing their exposure to these markets, while domestic advertisers have been forced to cut their budgets to minimize their losses.

The report forecasts adspend in Ukraine to shrink 62.3% this year, on top of a 51.2% decline in 2014. Russian adspend grew just 4.3% in 2014, which was the first year of growth below double-digit rates since 2009, and the market is expected to shrink by 16.5% in 2015, says the report. In addition, the report forecasts a 33.5% decline in adspend in Belarus this year. These three markets account for 2.1% of global adspend, so their sudden decline has slowed, but not derailed, global adspend growth, says the report.

 The Chinese economy is starting to slow after years of blistering growth, as the technology gap with mature markets has narrowed, making productivity growth harder to come by. The debt-fuelled growth has left it with a large repayment burden, and the property sector is burdened by a large amount of unsold property. However, China is still growing at rates most other countries would regard with envy: GDP grew 7.4% in 2014 and the government has set a target of 7.0% growth in 2015.

China’s ad market is slowing in step with its economy, but remains very healthy by international standards. The report forecasts that Chinese adspend will grow 9.1% this year; below the 10.5% annual growth it averaged over the past five years, but more than twice the rate of the world as a whole. Between 2014 and 2017, the Chinese ad market is expected to to enjoy an average growth rate of 8.5% a year.

Although the election of its new Syriza-led government has raised concerns about Greece’s willingness and ability to reform its economy, pay its debts and even remain in the Eurozone, the recovery in Eurozone adspend has remained on track.

Adspend in the Eurozone grew 1.5% in 2014 after shrinking 5.2% in 2012 and 2.5% in 2013. The report forecasts growth to continue to improve, though very gradually, from 1.6% in 2015 to 1.9% in 2017.

Steve King, ZenithOptimedia’s CEO, Worldwide, concludes that  “…television will remain dominant for many years to come… (though) advertisers are increasingly utilizing online video as an invaluable complement… combin(ing) the emotional connection of television… with the efficient targeting and measurable effectiveness of digital display… )

For access to additional information, please visit ZenithOptimedia here.