U.S. Ad Growth to Slow in 2017 After Olympics and Elections, Zenith Sees Political "Uncertainty"

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U.S. internet ad spending will rise 16.9 percent this year to $60.9 billion and keep growing. In 2017, it should hit $69.2 billion to overtake TV's $68.6 billion.

U.S. advertising spending will grow 3.8 percent in 2017 to $198.1 billion after a 4.5 percent gain this year to $190.8 billion in major media, helped by the elections and the Summer Olympics in Rio, along with a healthy economy, says prognosticator Zenith in its latest forecast.

In September, the firm had boosted its U.S. ad spending growth estimate for 2016 to 4.4 percent, compared to a previous prediction of 3.8 percent.

The company said there was "uncertainty in the marketplace given the recent elections," but said advertising was expected to increase in 2017, followed by a 3.5 percent improvement in 2018, and 3.2 percent growth in 2019, according to its updated forecast that the company will unveil officially at the UBS Global Media and Communications Conference in New York on Monday morning.

"Digital, particularly mobile, continues to take dollars away from print media as consumers use mobile apps and other outlets to consume content digitally," said Zenith. "Digital consumption has also driven overall video consumption up, even while linear television viewing continues to decline."

On a global basis, Zenith calls for 4.4 percent ad growth in 2017 to $566 billion, the same percentage as forecast for 2016. In September, the firm had raised its 2016 forecast from 4.1 percent to 4.4 percent. 

"This is a strong performance, given that the unexpected results of the U.K.’s referendum on EU membership and the U.S. presidential election have increased political uncertainty and raised the risks of restrictions to international trade," Zenith said. 

Zenith forecasts 4.4 percent worldwide growth in 2018 and 4.1 percent in 2019. 

In the U.S., as elsewhere, digital has been a key driver of ad spending, but TV also is posting gains. U.S. TV ad spend will rise 2.1 percent to $68.1 billion and it will hit $68.6 billion in 2017. It is likely to decline, though, in 2018 and 2019, according to Zenith. Network TV ad spending will rise 1.5 percent in 2016, said Zenith, up from its previous 1.0 percent forecast "given a stronger than expected scatter market." In 2015, TV ad spend shrunk 5 percent.

U.S. internet/digital advertising spending will rise 16.9 percent this year to $60.9 billion and keep growing. In 2017, Zenith expects it to hit $69.2 billion to overtake TV ($68.6 billion).

Social media and online video will be key growth drivers globally, with the former set to hit $50.2 billion in 2019, with a 72 percent gain between 2016 and 2019, according to Zenith. That will leave social media just shy of global newspaper advertising, which is expected to reach $50.7 billion in 2019. "By 2020 social media will be comfortably ahead," Zenith added. Social media will account for 20 percent of all internet advertising in 2019, up from 16 percent in 2016.

Online video advertising is growing almost as quickly as social media, at 18 percent a year, to hit $35.4 billion worldwide by 2019.

Asia remains the key driver of global ad growth, with a recovery in Russia and Eastern Europe also contributing, according to Zenith. But the Middle East and North Africa are seeing declines "amid conflict and low oil prices," while Latin America is growing more slowly due to recessions in Brazil, Argentina, Ecuador and Venezuela.

"Growth in China has slowed down markedly over the last few years, but is still 7.0 percent a year, and as the second-largest ad market globally, behind only the U.S., that equates to a lot of extra ad dollars each year," said Zenith. "We expect China to contribute 25 percent of the growth in global ad spend between 2016 and 2019."

Meanwhile, two more firms also released their ad-industry forecasts: Group M and Magna.

The latter says global ad sales will reach $493 billion this year, up 5.7 percent, representing the strongest growth in six years and driven by social media and internet search. Ad growth will slow to 3.6 percent in 2017, though.

"The two global media vendors dominating search and social, Google and Facebook, together control more than half (54 percent) of total digital advertising market," Magna said.

Magna says TV ad sales were resilient in 2016, up 4 percent to $186 billion globally, but it will shrink slightly in 2017.

GroupM in its latest ad forecast said that “2016 was a maxi-quadrennial without the maxi, as neither the Summer Olympics, not the European soccer, nor the U.S. elections surprised to the upside.” It said that ad growth in the developed world “looks to have touched a post-Lehman [2008 bankruptcy] high of 3.2 percent, but for next year we have this at 2.8 percent, reverting to its 2000-2015 norm of 2.4 percent.” 

In more emerging markets, which GroupM calls “the faster-growth world,” the firm said “our lowish 6.1 percent [forecast] for 2016 accelerates to a new-normal 7.3 percent in 2017.” It added; “The ‘old normal’ 13.8 percent 2000-2015 is just a memory, except for some in the digital world.”

Total worldwide ad spending should grow 4.3 percent in 2016 to $524.5 billion, followed by a 4.4 percent gain in 2017 to $547.4 billion, GroupM forecasts. North America will see a slowdown from a 3.1 percent gain this year (to $188.7 billion) to 2.6 percent in 2017 (to $193.7 billion).

For 2017, GroupM trimmed its U.S. ad forecast from 3 percent to 2.6 percent. “We attribute the deterioration to elevated political uncertainty and continued weak GDP growth both globally and within the U.S.,” it said.

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