GroupM, the media investment group of WPP, today updated its ad investment forecasts for 2017 and 2018. Globally, GroupM anticipates growth of 3.1% this year and 4.3% in 2018, an increase of $23B next year.
GroupM points to global GDP growth with rising consumer demand, fixed investment, industrial production and exports as contributors to its more positive outlook for 2018. However, identified risks are weak investment and productivity, as well as the spectre of excessive debt, which may deter policymakers from raising interest rates.
“Growth is wide with more people working, but shallow with wages growing slowly. If the global economy sustains its rising demand for labor, it may reveal a widening skills gap. Then, competition should raise wages, spurring investment in productivity and helping inflation to finally surpass central bank targets,” said Adam Smith, Futures Director.
Of key interest to marketers is advertising’s share of global GDP, which is predicted to be 0.7% in 2017 and 0.69% in 2018. This reflects a long trend of decreasing share for advertising, often cited as evidence of a structural industry challenge. However, GroupM believes a large factor is the amount of “ad money” now directed to data and technology for consumer engagement in digital. “For every dollar that migrates from legacy to digital media, GroupM estimates 25 cents goes to technology and data. This is not counted in a now antiquated concept of working media investment,” said Smith. “We also know that in periods of low inflation, marketing money gets reallocated to promotion; this is a cyclical challenge, not a structural one.”
Six countries are expected to drive 68% of incremental investment next year: U.S., China, Argentina, Japan, India, and the U.K. In the U.S., unemployment is 4.4% and falling; real wages are growing 2.5% and rising; and consumer confidence is at a 17-year high, though consumer spending growth remains sober at 2.7% in 2017 and 2.3% predicted for 2018.
China‘s economy is rebalancing as demand for consumer goods has exceeded export growth since 2011 and fixed investment since 2015; and the percentage of retail sales in GDP continues to rise steadily into the higher 40s. China’s improvement ties to supply-side reform and a strong real estate market in lower tier cities. However, marketers seeking growth will be concerned over a decline in the propensity of the Chinese to try new products.
Argentina‘s growth is the dividend of political dynamics and the appreciating peso.
In Japan, the world’s third-largest economy, Abenomics, the policies advocated by Prime Minister Shinzō Abe, have stimulated the strongest increase in consumer demand (3.4%) in three years.
India is looking past recent reform disruptions (demonetization and sales tax). Continuing urbanization and rising wages are supporting strong consumer growth in finance, durables, services and retail. E-commerce is becoming a key channel for FMCG, and ad investment is anticipated to shift significantly from other media to shopper/performance marketing. Amazon is now India’s second-biggest advertiser as it contests the e-commerce market with domestic rival, Flipkart.
U.K. ad investment growth is propelled almost entirely by “pure-play” digital as it reaches 60% share in a market that remains relatively stable but short-term focused as Brexit looms. A fuller discourse on the U.K. outlook is here. If the Eurozone were one country, GroupM observes that it would challenge India for fifth place in contribution to global ad growth.