Zenith: Online advertising spend growth is falling rapidly in Australia

By Chris Pash | 9 July 2019
  • Zenith, in its latest forecasts, says the growth rate for internet advertising is falling rapidly as the digital market matures.
  • Much of the internet ad spend upside is from local businesses with small campaigns using Google and Facebook. 
  • Traditional media remains the priority for most big brands. 
  • Online classified advertising is starting to fall. 

Internet advertising growth in Australia is expected to slow to 3% by 2021 from 12% in 2018, according to the latest forecasts from Zenith, Publicis Groupe's data unit.

Zenith, citing a softening of the market against a turbulent economic backdrop, expects around 7% for 2019.

"Therefore in Australia, we expect internet ad spend growth to fall to an average of 5% year-on-year, for the next three years," says Zenith.

Zenith forecasts total Australian ad spend to grow by 3% this year to $17.19 billion.

That’s aligned with the March growth forecast but reflects a heavier uptake of internet and a steeper fall in TV revenues.

Growth in 2018 was 6%, up from Zenith’s last estimate of 3.2%, creating a tougher comparative for 2019.

Elizabeth Baker, Zenith’s head of investment, Sydney, says Australia is ahead of curve for digital share of ad spend, hitting the 50% level back in 2017, and will edge closer to 60% over the next few years.

"The original catalyst for digital spend growth was the transition of print classifieds into online," she says.

"Today, the fastest growing channel is video which now represents 8% of the total ad market. The mobile platform is also a growing category and now accounts for a quarter of all advertising spend. We anticipate that this will only increase with the launch of 5G in Australia sometime later this year.”

According to Zenith’s latest Advertising Expenditure Forecasts report, internet advertising will account for 52% of global advertising expenditure in 2021, passing the 50% mark for the first time.

That’s up from the 47% of global ad spend that internet advertising will account for this year, and 44% in 2018.

Global internet ad spend growth is led by the overlapping channels of online video and social media, which are expected to grow at average rates of 18% and 17% a year to 2021.

These channels are benefitting from technological improvements to smartphone technology, connection speeds, and advertising targeting and delivery, combined with strong growth in investment in content.

5G technology, which launched in South Korea and the US in April, and is starting to roll out elsewhere, will further improve brand experiences on these channels by making mobile connections much faster and more responsive.

Other channels are growing at a slower pace.

Paid search, which accounted for 37% of internet ad spend in 2018, grew by 11%. Zenith forecasts its growth rate to fall to 7% in 2021.

Online classified advertising is starting to lose out to other digital channels, or free alternatives. Online classified advertising grew 9% globally in 2018, but is already starting to shrink in some markets, and in 2021 Zenith expects spending to fall by 1.6% globally.

Much of the growth in internet ad spend is coming from small, local businesses spending their budgets on platforms such as Google and Facebook, via self-serve tools to manage campaigns and targeted audiences.

The global average is made up of very many small advertisers that spend all their budgets online, and large advertisers that on average devote less than half their budgets to it.

Big brands are investing large sums in internet advertising, but the majority still spend most of their budget in traditional media.

“The categories that have advanced the furthest in using modern digital channels are technology, media, finance and professional services,” says Matt James, Zenith’s global brand president.

“And even within these, brands still rely on traditional media to create broad mass awareness and reinforce brand values.”

Within the traditional media, print has long been in decline as online alternatives have taken their readers and advertisers.

The advertising revenues for printed newspapers and magazines peaked at $US164 billion in 2007 and will total just $US70 billion this year.

Broadcast television is starting to shrink but not on the same scale as print. Zenith forecasts traditional television advertising  revenues to shrink every year from now to 2021, falling from $US184 billion in 2018 to $US180 billion in 2021.

Other traditional media are more healthy.

Radio is increasing advertising revenue by 1% annually.

Out-of-home contractors continue to expand their digital display networks, contributing to 4% annual growth in their revenues.

Cinema, although accounting for 0.8% of total ad spend, is growing at 12% a year, thanks mainly to a boom in the popularity of cinema in China.

Zenith forecasts global ad spend to grow by 4.6% this year to $US639 billion, marginally down from the 4.7% growth forecast in March.

However, Zenith says this is a strong result given the increased estimates of how much was spent in 2018. Zenith now estimates growth in 2018 at 6.4%, up from its previous estimate of 5.9%, creating a tougher comparative for 2019.

Global ad spend is now forecast to increase by $US28 billion this year.

Almost half this growth ($US13 billion) will come from the US, which is benefiting from very rapid growth in internet advertising – at 15.4%, ahead of the global average of 11.7%. 

China will be the next biggest contributor to growth, adding $US4 billion in extra ads pend, followed by the UK and India at $US1 billion each.

“The point at which internet advertising exceeds 50% of global ad spend has been approaching for some time, but this is the first time it has appeared in our forecasts,” says Jonathan Barnard, head of forecasting at Zenith.

“However, 2021 will be the first year of single-digit internet ad spend growth since 2001, the year the dotcom bubble burst.” 

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