Global Marketing Services Will Exceed $1 Trillion for First Time in 2017

Hal Conick
Worldview
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Key Takeaways
​What? Marketing spending across the world will top $1 trillion for the first time in 2017.

So What? Global ad investment shadows the global economy, according to Adam Smith, GroupM futures director. When the economy is good, investment in ads is good. 

Now What? The media investment group, Smith says, may be underestimating its power. Are businesses also underestimating the power of digital marketing?

​Aug. 9, 2016

It’s not as high as previously expected, but total marketing expenditures will move past $1 trillion in 2017, according to GroupM

For the first time, total marketing expenditures will exceed $1 trillion globally in 2017, according to a forecast from GroupM, a media investment management group

The 2017 ad volume, predicted to rise 4.3% to $552 billion, will push past the trillion-dollar mark when combined with other marketing services. However, growth will be slower than predicted, as countries such as China and Brazil both had growth revised downward. The prior predicted growth of $22 billion has been trimmed to $20.5 billion.

GroupM posits the U.S. will be the leading contributor to global ad growth, overtaking China for the first time since 2007. In all, the U.S. market will be $178.8 billion in 2016 and $184 billion in 2017, nearly 95% of the total North American ad spending.

Political, pharmaceutical​ and consumer packaged goods categories are strong contributors to the thriving U.S. television advertising marketplace, which will grow 3.4% in 2016, instead of 2.3% as previously predicted.

Adam Smith, futures director of GroupM, says marketers across the world have been cautious since the recession in 2008. For this reason, cost control has been tight, but the history of the present recovery cycle shadows the general economy, so the situation may quickly improve. 


“We may be under-measuring a little as marketing investment embraces more far-flung recesses of the digital domain and supports new extensions to advertising [such as] content creation, campaign ‘activation’ and so on,” he says. 

The Effect of China and Other Markets

China, in particular, is now in a “new normal,” GroupM reports. Growth is on a downward trajectory, from 9.1% revised to 6.6% as the slowdown in profits and fixed investment is adversely affecting consumer demand. Thus far, 2017 growth looks to be a bit stronger at 7%.

China is progressing from industry to services, Smith says, which he says is a short way to discuss “the biggest story in the global economy.”



“China’s advertising had already reached Western levels of saturation (relative to GDP) by Lehman. It has thankfully begun curbing the excessive levels of investment in industrial capacity, which underpinned unsustainable elements of the double-digit past,” he says. “Its population is still urbanizing; its smaller cities are becoming larger ones; wage growth is strong. These are the fundamentals of rising affluence and, therefore, of advertising.”

Sustaining this level will be China’s big challenge as a country, he says. China will need to keep productivity high in an aging population and figure out how to keep social order in line with “a more individualistic middle class testing one-party politics harder with each successive year.”

Brazil’s economy has also been hit hard. Decreasing employment and political turmoil took possible growth from 7% to 1% optimism, by GroupM’s measure.

India is amid a huge marketing expansion, the report found, as stable finances, reforms and urban demand are poised to grow expenditures by 14% in 2016 and 15% in 2017. GroupM reports the country may become the tenth ad market with more than $10 billion in investment by 2018.

Up and Down in Russia

The strangest story of the report may belong to Russia​. GroupM says the economy shrank 3.7%, and media investment shrank 10% in 2015, but it saw a “very rapid” recovery in the first quarter of this year. GroupM predicts a 7.8% ad investment growth in 2016 and a 9.4% growth in 2017.

“Russia is a cyclical story. Oil prices fall. Consumer demand falls. Ruble devalues,” Smith says. “Government spurs itself to reforms to start reducing this oil dependency, and particularly, dependence on imports it can no longer afford or which it is denied by international sanctions. Economy starts recovering. Advertising picks up. It will rebound strongly if oil does, but there is no sign of this yet. The Russian government has managed the domestic economy well, whatever its shortcomings in democracy and foreign policy.”

 

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Author Bio:

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Hal Conick
Hal Conick is a staff writer for the AMA’s magazines and e-newsletters. He can be reached at hconick@ama.org or on Twitter at @HalConick.
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