Not many companies would say 2020 is great for business. However, GroupM's global year-end forecast found that things weren't quite as bad as expected, especially when compared to the poor outlook in the media investment firm's half-year forecast.
Advertising weathered the storm relatively well, according to the recently released global report "This Year Next Year". Revenue declined by only 5.8% based on the underlying basis (excluding US political advertising). This is a much better expectation than GroupM's June forecast, which is down 11.9% for 2020.
According to Brian Wieser, GroupM's global president for business intelligence, the author of the report, the focus on three markets – the US, UK and China – has a disproportionate impact on numbers. The GroupM data does not measure ad spend, it measures media owners' ad revenue, a subtle but important difference. As Wieser noted, "Ad spend implies spending on various services that we don't value." It's also much more difficult to estimate mid-level ad spend than it is to track mid-level media owners' ad revenue.
“If you look at our June forecast, we expect advertising revenue to decline by 12% in 2020 in the median of the roughly 60 we track. Now we estimate that the mean drop will be 11%, but the mean is 6%. The difference is due to the outperformance of China, the US and the UK, while the typical country will probably do only slightly better than we expected in the middle of the year, ”Wieser told Adweek.
He said the massive growth in advertising is primarily going to Google and Facebook, which Wieser said is a function of a “secular trend related to creative destruction, the idea that the typical business that existed today was eight years ago did not exist. The types of new businesses that make a big digital difference in the UK, US and China. "
However, based on GroupM's newly revised numbers in the study, the company estimates that in 2020 it will generate $ 591 billion in advertising revenue for the world's media owners, including those who advertise in digital environments, television, audio real estate and sell newspapers, magazines, outdoor media and cinema. "
Some other facts to consider from the forecast:
- The nature of the downturn and new consumer behavior forced businesses to quickly adapt to e-commerce models and digital advertising benefited. As a result, GroupM has updated its outlook for the global advertising market for 2021 from its June forecast from 8.2% to 12.3% growth.
- Each of the top eight markets are expected to grow nearly 2% and better in 2021.
- In 2020, digital expansions from TV, radio, print, and outdoor advertising should be $ 37 billion, 15% of traditional media activity, down from $ 23 billion, or 7% five years ago. Digital expansions will account for 16% of advertising spending on traditional media by 2024.
- TV advertising, excluding political advertising, will decline 15.1% in the US before rising 7.8% next year.
- Outdoor advertising, including out-of-home digital media, is projected to decline 31% in 2020. There is likely to be a partial recovery next year with growth of 18%.
Admittedly, forecasting during a pandemic is difficult and varied for GroupM, and the study says that a better view of the new forecasts is to focus on longer-term numbers.
“Expectations through 2024 are generally higher today than they were before – both based on our estimates from June and based on the state of affairs before the pandemic. This is at least partly due to the fact that digital advertising is generally expected to grow faster than previously assumed and from a higher plateau, which can be attributed to faster than expected growth in e-commerce and the support of advertising activities, "wrote Wieser in the Forecast.