THE WALL STREET JOURNAL
Magna upgrades 2017 global forecast on search and social surge, despite political and economic uncertainty
By Alexandra Bruell Dec. 5, 2016 12:00 a.m. ET
Ad-spending growth is poised for a significant slowdown in 2017, due to economic and political uncertainty, according to the latest forecast from Magna Global, the ad-buying agency owned by Interpublic Group of Cos. The global ad business will see a slowdown to 3.6% spending growth next year, down from the 5.7% growth clip projected for 2016, when spending is expected to total $493 billion, Magna said. The 2017 forecast is an improvement over a June estimate that 2017 spending would grow 3.1%. U.S. ad sales will face a slowdown to 1.7% growth in 2017, compared to 6.9% growth in 2016, according to the latest forecast, including the impact of political and Olympic spending. Magna is among a handful of agencies releasing their spending forecasts at the UBS media conference on Monday. Weighing on ad spending are several factors, including fewer advertising opportunities at big events like the election and Olympics, as well as uncertainty around the impact of Donald Trump’s presidential election victory and the U.K.’s decision to exit the European Union. “If you look at the stock market reaction and also the consumer confidence index after Trump’s election, everything seems to be ok [in the U.S.] so far, but it’s too early to say,” said Vincent Létang, executive vice president for global market intelligence at Magna. Globally, it’s the “lowest growth rate recorded in 15 years outside of the great recession in 2008-2009,” said Magna in its forecast. Strong digital ad spending growth, especially in social and search, is one bright spot and explains why Magna upgraded its global forecast from June, Mr. Létang said. The digital spending was fueled by marketing spending outside of measured media budgets, “and not just taken away from traditional media budgets,” he said. According to Magna, digital spending is on track to surpass linear TV spending in 2017, thanks largely to a surge in mobile ad-spending. By 2021, mobile advertising will have increased to $215 billion, or 72% of total digital budgets, said Magna. “One factor accelerating the shift to a mobile-centric digital market is the stagnation in desktop impressions caused by ad blockers while blockers are largely ineffective so far in the mobile, app-centric environment,” Magna wrote. This year will mark the first year without any growth for desktop ad sales, which will start to shrink in 2017, and “be in permanent decline thereafter,” Magna said.
Pivotal Research Analyst Brian Wieser also has a less than optimistic view of the global ad market in 2017. He has revised his forecast to a 2.0% growth rate for the year ahead, versus a previous estimate of 2.8% in 2017. “Our guess is that uncertainty will cause a mild drag early in the year, much as we saw in late 2013 at the time of that year’s U.S. government shutdown,” Mr. Wieser wrote in a recent report. “However, uncertainty is much more pronounced now, and so we may see a more significant effect.” Maurice Lévy, chief executive of Publicis Groupe SA, recently said that he expects there to be a slowdown in the first quarter as marketers take a “wait and see” approach to Mr. Trump’s policies.
In its mid-year forecast, WPP’s GroupM, the largest ad buying firm in the world, had been anticipating U.S. ad spending would grow 3% to $183.9 billion next year. In its latest forecast set to be released at the UBS conference, GroupM is shaving that growth estimate to 2.6%, due to weak global and U.S. GDP growth, as well as political uncertainty that has not yet impacted budgets.
Ad-spending growth is poised for a significant slowdown in 2017, due to economic and political uncertainty, according to the latest forecast from Magna Global, the ad-buying agency owned by Interpublic Group of Cos. The global ad business will see a slowdown to 3.6% spending growth next year, down from the 5.7% growth clip projected for 2016, when spending is expected to total $493 billion, Magna said. The 2017 forecast is an improvement over a June estimate that 2017 spending would grow 3.1%. U.S. ad sales will face a slowdown to 1.7% growth in 2017, compared to 6.9% growth in 2016, according to the latest forecast, including the impact of political and Olympic spending. Magna is among a handful of agencies releasing their spending forecasts at the UBS media conference on Monday. Weighing on ad spending are several factors, including fewer advertising opportunities at big events like the election and Olympics, as well as uncertainty around the impact of Donald Trump’s presidential election victory and the U.K.’s decision to exit the European Union. “If you look at the stock market reaction and also the consumer confidence index after Trump’s election, everything seems to be ok [in the U.S.] so far, but it’s too early to say,” said Vincent Létang, executive vice president for global market intelligence at Magna. Globally, it’s the “lowest growth rate recorded in 15 years outside of the great recession in 2008-2009,” said Magna in its forecast. Strong digital ad spending growth, especially in social and search, is one bright spot and explains why Magna upgraded its global forecast from June, Mr. Létang said. The digital spending was fueled by marketing spending outside of measured media budgets, “and not just taken away from traditional media budgets,” he said. According to Magna, digital spending is on track to surpass linear TV spending in 2017, thanks largely to a surge in mobile ad-spending. By 2021, mobile advertising will have increased to $215 billion, or 72% of total digital budgets, said Magna. “One factor accelerating the shift to a mobile-centric digital market is the stagnation in desktop impressions caused by ad blockers while blockers are largely ineffective so far in the mobile, app-centric environment,” Magna wrote. This year will mark the first year without any growth for desktop ad sales, which will start to shrink in 2017, and “be in permanent decline thereafter,” Magna said.
Pivotal Research Analyst Brian Wieser also has a less than optimistic view of the global ad market in 2017. He has revised his forecast to a 2.0% growth rate for the year ahead, versus a previous estimate of 2.8% in 2017. “Our guess is that uncertainty will cause a mild drag early in the year, much as we saw in late 2013 at the time of that year’s U.S. government shutdown,” Mr. Wieser wrote in a recent report. “However, uncertainty is much more pronounced now, and so we may see a more significant effect.” Maurice Lévy, chief executive of Publicis Groupe SA, recently said that he expects there to be a slowdown in the first quarter as marketers take a “wait and see” approach to Mr. Trump’s policies.
In its mid-year forecast, WPP’s GroupM, the largest ad buying firm in the world, had been anticipating U.S. ad spending would grow 3% to $183.9 billion next year. In its latest forecast set to be released at the UBS conference, GroupM is shaving that growth estimate to 2.6%, due to weak global and U.S. GDP growth, as well as political uncertainty that has not yet impacted budgets.
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