What: Globally, media owner advertising revenues are forecast to grow by 6.4% in 2014 to US$516 bn, according to a report by Magna Global.
Why it matters: Following this forecast, Latin America will have a 15% increase driven by the digital media strategies related to the Soccer World Cup, especially mobile platforms which account for 27% of market share.
Of the US $31bn of additional advertising expenditures expected in 2014, almost 60% (US $10bn) will come from North America and Emerging Asia (US $8.5bn),according to Magna Global, IPG mediabrands´ global media strategy unit.
In terms of individual markets, US and China markets will provide nearly 50% of the world market’s growth (US $9.5bn and US $5.5bn respectively) followed by Brazil and Indonesia (US $4.5bn combined).
Global advertising growth (2006-2019)
- The combination of a improved economic outlook and record incremental spend generated by several non-recurring events will boost marketing activity ( mid-term elections cycle, The Winter Olympics, The Soccer World Cup) will be key in generating the strongest annual advertising growth since 2010 (8.4%).
- Advertising revenues will grow by double digits again (15.4%) in 2014, mostly driven by higher-than-expected economic inflation -especially in Argentina- and by soccer madness as the World Cup returns to Latin America for the first time in 30 years.
- In the US, media owners advertising revenues are forecast to grow by +6.0% this year, to US $168bn- an increase from December 2013 forecast of +5.5%- thanks to an improved economic outlook and non-recurring events: 2014 mid-term elections,sports events worldwide and the implementation of the Affordable Care Act.
- Non-recurring 2014 sport events will contribute to global TV growth (+7.2%) compared to 2.7% growth in 2013.
Advertising growth by major geographical regions (2013-2014)
- Digital media continues to grow by double digits globally, although the growth rate will slow-down slightly due to the maturity achieved in many markets. Still, digital spend will increase by %16 this year to nearly US $140bn and 27% global market share (2013: 25%).
- Of that US $20bn in additional spend, the bulk will come from social media formats (US $4.5bn), search (US $10bn) and video (US $2bn), while non-social, non-video display formats (e.g. banners) are stagnant globally and experiencing a steep decline in several mature markets.
- Mobile media (campaigns on smartphones and tablets) is now capturing the bulk of digital media growth. In 2014 it will grow by US $10bn to US $27bn, a growth rate of 61% compared to just 9% for non-mobile formats, and -1% for non-mobile display.
The advertising economy in Latin America continues to grow, and according to our report is the only region that will have a growth rate of double digits, reaching 15% by the end of 2014.
“Although inflation plays an important role, there is no doubt that the eyes of advertisers are set on the Soccer World Cup in Brazil which has just started. This event is the key driver of the advertising industry in Latin America this year,” said Shaffia Sánchez, President, World Markets, Magna Global.
Advertising growth in LatAm and U.S.
Latin America advertising revenues will grow by double digits again (+15.4%) in 2014.
This growth is mostly driven by higher-than-expected economic inflation (especially in Argentina, following the peso devaluation earlier this year) and by soccer madness as the World Cup returns to Latin America for the first time in 30 years.
This is despite an economic environment that is anything but buoyant: the IMF recently cut its real GDP growth forecast from 2.9% to 2.5%, thus predicting further slow-down compared to the already-sluggish 2012-2013.
Driven by inflation of media costs, ad spending is expected to grow by 28% to 35.5 billion pesos (US $ 6.3 billion approximately according to the official exchange rate in 2013 of 15.46) this year , even though the economy is in a period of downturn about to enter recession (0.5% of real GDP growth forecast by the IMF).
The advertising market in Argentina has also experienced a big boost because of the World Cup to be played in Brazil, its neighbor and rival country.
TV is expected to grow advertising revenues by 30%. Spending on digital media will have an increase of 35% taking into account the relatively low market share of 8.5% driven by social and mobile formats.
Brazil will be at the center of the media and marketing world in the summer of 2014 when the FIFA World Cup returns to the land of soccer for the first time since 1950. Advertising spending was strong during the first months of this year and TV prices had a sharp increase, which led to raise the annual growth forecast to 15.8%.
This is bound to bring incremental spending from domestic and international advertisers and drive media inflation well above general inflation despite the sluggish economic environment (1.8% real GDP growth) and social discontent, relieving economic hardship.
Although there was a cutback in the long-term growth forecast, the high single-digit growth between 2015-2019 and 2016 Rio Olympic Games should help Brazil to leave the # 6 position as the largest advertising market in 2013 to be located at # 4 position towards 2019.
Chile is some kind of economic stability oasis in South America. Reflecting a growing economy, the advertising market will increase 2.6% in 2014 reaching US $ 1.4 bn and reaching 5.1% in 2015, which is a decent growth if taken into account the low inflationary environment.
Television and newspapers are the major media categories in Chile with 49% and 22% market share respectively.
Colombia has shown a robust growth in recent years. Advertising spending had a higher growth than GDP growth for five consecutive years.
An optimistic outlook for 2014 forecasts a 7.6% advertising growth reaching almost COP 9,700 million (US $ 5.2 billion), slightly above the nominal GDP growth of 7.0%.
Ad growth will be driven by an expansion in the economy (4.5% growth in real GDP with moderate inflation of approximately 3% per year) and strong consumer confidence.
Television is the leading category in media, accounting for two-thirds of total advertising spending.
The advertising market in Mexico is valued at more than 72 billion pesos (US $5.7 bn).
Despite a slow start this year, the market grew 5.0% in 2013, which was even faster than economic growth (nominal GDP growth of 3.1%). Amid an economic acceleration (+6.2% of nominal GDP) advertising spending will have an additional growth of 8.5% in 2014.
The market is controlled by television with 60% market share.
Television will get the greatest benefits of the World Cup 2014 because TV ad spending will grow by 7.0%. As a result of soccer popularity in Mexico, its’ ad spending is expected to increase by US $ 35 million this year just by the presence of Mexico in the World Cup.
In the US, media owner advertising revenues will grow 6,0% in 2014,reaching US $ 168 bn.This shows an increase compared to December 2013 forecast of +5.5%.
The main growth drivers are the improved economic outlook and record incremental spend generated by several non-recurring events. The biggest of those events is the mid-term elections cycle followed by the Winter Olympics.
The soccer World Cup will be make a modest boost at the scale of the entire market, but a significant one in the Hispanic television sector. Another one-off spending driver this year is from insurance companies, healthcare institutions and local governments communicating around the implementation of the Affordable Care Act.
As always, US television will benefit the most from the non-recurring drivers of 2014, with advertising revenue growth of +8.3%, following 2013’s stagnation (-0.6%). National TV benefitted from the Olympics in the first quarter. Local TV will gain from political and health-related campaigns throughout the year. Hispanic TV will be boosted by the soccer .