MAGNA reveals that the global advertising market place shrank by -4.4% to $569 billion amidst the COVID-induced recession, but some markets (US, China) proved more resilient than initially feared, thanks to the scale and resilience of digital media formats (+8%).
TEN KEY FINDINGS
1. According to MAGNA’s latest report, media owners’ linear advertising revenues decreased by an estimated -18% to $233 billion globally, amidst global economic recession, in line with MAGNA’s spring forecasts (-16%).
2. Digital advertising sales slowed down but continued to grow through the COVID-19 crisis: +8% to reach $336 billion (58% of total advertising transactions).
3. Total global advertising revenues (linear + digital) shrank by $25 billion (-4.2%), down to $569 billion a milder decline than expected in June (-7.2%).
4. Travel, automotive and restaurants made the heaviest advertising budget cuts while CPG/FMCG, finance and technology remained stable overall.
5. Sixty-six of the 70 markets analyzed by MAGNA shrank this year. The world’s two largest markets, US (-1.3%) and China (+0.2%), were among the most resilient, while top ten markets declined between -4% and -8%.
6. The Latin America region suffered the most (-11.3%), followed by EMEA (-6.4%) and APAC (-4.9%).
7. Looking at 2021, COVID-19 vaccination, economic recovery and delayed cyclical events will fuel a global rebound for marketing and advertising activity: +7.6% to $612 billion (linear: +3.5%, digital +10.4%, US +4.1%).
8. Despite economic recovery, global linear advertising spend will remain $42 billion smaller (15% smaller) than the pre-COVID-19 level of 2019.
9. Asia Pacific has been less affected than other regions by the COVID-19 pandemic and economic recession. This is a combination of strong economic resilience in China (GDP +1.9%), offsetting weaker performance in Japan (-5.3%) and India (-10.3%).
10. Record levels of political advertising spending brought $6.1 billion in incremental advertising sales and generated two percentage points of extra market growth that benefitted local TV ($3.6 billion) and, for the first time, digital media ($1.5 billion).
GLOBAL MARKET PLACE: -4% IN 2020
The latest MAGNA study of global advertising market trends, reveals that media owners’ advertising revenues decreased by approximately $25 billion in 2020 (-4.2%), from $594 billion in 2019 to $569 billion. Most industry verticals reduced marketing and advertising spending due to the severe economic recession triggered by the COVID-19 pandemic, as global GDP shrank by -4.4% according to the IMF. The global advertising market will, however, recover by +7.6% in 2021, to reach $612 billion, as a gradual return to normal business conditions will fuel robust economic recovery (real GDP growth +5.2%, IMF).
Brand advertising budgets and therefore linear ad formats (linear TV, linear radio, print, out-of- home and cinema) suffered the most from the economic recession and the restrictions to consumer mobility. Global linear ad spend shrank by -17.7% to $232.6 billion, marginally worse than expected by MAGNA in the spring (-16%).
Television remains the largest linear advertising channel with $149 billion in advertising revenues in 2020. Ad sales shrank by -12% in 2020, in line with expectations, due to the cancellation of many TV campaigns in key verticals (e.g. automotive) and the postponement of major sports events. Print, radio and OOH ad sales declined more heavily: -24% to -25%. Out-of- home, the most dynamic linear media channel pre-COVID was hurt by the decline in consumer mobility, traffic and audience, in addition to the fall in demand from local and national advertisers. Finally, theater closures caused cinema advertising to decline by -66% this year.
Digital formats advertising sales (search, video, social, banners) grew by +8% to $336 billion, to reach a market share of 59% globally. Back in June, MAGNA was expecting digital media spend to grow slightly (+1%) despite the COVID-19 recession; in fact, digital media spending grew way beyond expectations partly because of the COVID-19 impact accelerated the organic transition towards a digital-centric marketing ecosystem. Digital media consumption (social and video in particular) accelerated since lockdown; e-commerce exploded as large brands and small business ramped up their digital business in addition to “Direct-to-consumer” brands and ecommerce specialists; many local stores or restaurants started to use search and social marketing to advertise delivery, or “click-and-collect” to keep their business alive while stores were closed. Finally, consumer brand marketers showed a preference for lower-funnel marketing tools, at the expense of branding campaigns, that is classic in any recession time. In the last five years, the share of digital media had grown by three to four percent per year to reach 52% in 2019; in 2020 it jumped by seven percent to 59%. The COVID-19 impact on lifestyles and business model will accelerate the digital transition in a lasting way: one year ago MAGNA was forecast the share of digital formats to reach 64% by 2024; now MAGNA expects that market share to reach 67% in 2024 and 69% in 2025.
Search remains the largest digital advertising formats (+7% to $164 billion, 49% of total digital advertising) as product search from ecommerce giants (Alibaba, Amazon) offset the slowdown of classic search engines (Baidu, Google). Social media ad formats benefitted from an acceleration in penetration and time spent during and since lockdown, and from the explosion in the volume of ad insertions compensated a lower revenue per insertion; social advertising grew by +17% to $87 billion. Digital video ad spend increased by +15% to reach $45 billion, as strong growth from short-form platforms (Youtube) offset the slowdown of full episode players and outstream video.
As the pandemic and economic crisis was global, so was the impact on advertising spending and revenues across markets. Latin America experienced the worst downturn (-11.3%) and EMEA performed below average (-6.4%). Asia Pacific markets shrank by an average -4.9% while North America was the most resilient region (-1.5%) helped by the scale of digital advertising and record levels of political spending. Sixty six of the 70 markets analyzed by MAGNA shrank this year, with two markets growing nominally due to hyper-inflation (Argentina and Ukraine) and two markets showing real albeit moderate advertising growth: China (+0.2%) and Taiwan (+2.0%). Among the largest ad markets, the two largest, US (-1.3%) and China (+0.2%) were also the most resilient this year, while the rest of the top ten markets declined between -4% and -8%.
Where total ad spend was almost stable, it was almost entirely caused by a large and resilient digital media segment, while linear media was down double-digit like everywhere else. In the US and China typically, the share digital media was already beyond 60% at the beginning of the year, and digital media spend grew by 10% in both markets; US linear media declined on par with the global average (-16%) while linear media decline in China was worse than average (-26%). Conversely the worst performance came from emerging markets where the digital media market share was too small to offset the heavy cuts in linear ad spend, even if digital spending grew too: Chile (-17%), Colombia (-20%), Malaysia (-22%).
2021: LINEAR STABILIZES, DIGITAL ACCELERATES
If, as expected, large scale COVID-19 vaccination takes place in the first half of the year, restrictions to business and mobility are gradually lifted, global economic activity should recover strongly. In its October forecast, the IMF predicted +5.2% for global GDP growth. Major events, if they can finally take place (Summer Olympics in Tokyo, UEFA Football Championship in Europe, and the Dubai World Expo) will also fuel the stabilization and recovery in marketing budgets and advertising spending.
In that scenario, MAGNA predicts global ad spend to grow by +7.6% to $612 billion. MAGNA raises its previous forecast (June: +6.1%) by 1.5 percent point. All regions will recover to some degree: APAC: +11%, LATAM: +9%, EMEA: +8%, North America: +4%.
Vincent Létang (pictured above), EVP Global Market Intelligence at MAGNA and author of the report, said: “Back in the spring, MAGNA predicted that digital media organic growth factors would drive digital to grow despite the COVID-19 recession (+1% globally, +3% in the US). It turns out digital media resilience was even stronger than expected (+8% globally, +10% in the US) and possibly because of COVID-19. Indeed the pandemic triggered a tremendous acceleration in both supply (digital media usage and audiences, ecommerce) and demand (small businesses embracing digital media to keep their business alive, big brands pivoting towards lower-funnel marketing channels as they typically due in recession times). MAGNA believes the return of consumer mobility, major events and economic recovery will prompt most industry vertical to grow their linear advertising budgets in 2021, but the long-term trajectory has shifted even further towards a digital-centric marketing environment for years to come.”
For detailed country breakdowns in the Asia Pacific region download the attached pdf.