Global economic recovery brings record ad market growth, Magna forecast
Magna has released its advertising forecasts for June 2021 indicating that global advertising spending will grow by $78bn in 2021 (+14%) to $657 billion, a new all-time high, following a decline of -2.5% in 2020. The marketplace will continue to grow in 2022 (+7%).
Advertising activity has been fueled by economic recovery (global GDP +6.4%) benefitting key ad-spending verticals severely hit by COVID-19 last year, for example, automotive, travel, entertainment, restaurants, stronger-than-ever organic drivers to digital marketing, and international sports events including Tokyo Olympics, UEFA Euro.
Digital ad formats capture most of the growth with ad sales up +20% to $419bn, 64% of total ad sales.
Linear ad sales are slower to recover but will stabilize full-year (+3% to $238bn).
All 70 ad markets monitored will expand again this year with China (+16%) and the UK (+17%) among the largest increases.
The US market will grow by $34bn (+15%, strongest growth rate in 40 years) to reach $259 billion, with digital ad sales up +20% and non-political linear ad sales up +4%.
Linear ad sales still represent the bulk of ad revenues for traditional media owners and their continued stagnation will trigger a wave of consolidation in the media industry, aimed at competing with digital media players.
Key findings in Netherlands
The Dutch economy will recover by +3.5% this year after falling by -3.8% in 2020.
The ad market will grow by +14.5%, driven by a digital acceleration, +19%, while linear advertising revenues will see a more moderate increase, +6%.
Linear advertising revenues will not return to pre-COVID levels within the next five years.
The Netherlands is the sixth largest advertising market in Western Europe, with 4.9 billion euros ($5.6 billion) in ad revenues expected in 2021. The Coronavirus outbreak triggered an economic recession in 2020, with Dutch real GDP contracting by -3.8%, a milder decline than what was seen in neighboring Belgium (-6.4%) and Germany (-4.9%).
Economic activity will grow by +3.5% is expected this year, according to the latest IMF forecast (April 2021), below the Eurozone average (+4.4%). Prime Minister Rutte declared two nationwide lockdowns in response to the virus, a full lockdown in the spring of 2020 and a partial one in the fall that persisted through early 2021.
The number of daily new Coronavirus cases peaked in at around 13,000 in late December and has remained elevated through much of 2021: as of late May, 2,000 to 3,000 new cases were identified each day, compared to 150-200 during this same time last year. A little less than 40% of the population has received at least one dose of the vaccine and 17% are fully vaccinated, putting the Dutch vaccine rollout slightly behind Germany (45% one dose, 19% fully vaccinated).
In this environment, television ad revenues, which account for nearly 20% of total advertising, dropped by -9% in 2020 and are expected to rebound by +8% in 2021. Improving demand from key sectors, including retail, food, and personal care, as well as a return to normal viewing patterns, will help to generate improved pricing power recovery (CPM inflation: +6% for a 30” primetime spot, vs. +3% in 2020) for the full year.
The return of the UEFA Euro Cup will also encourage many brands to grow their TV spending again, as Amsterdam’s Johan Cruyff Arena will host several matches during the UEFA Euro tournament in June 2021, and the Dutch national team is among the favorites. Over the long term, however, we expect television advertising revenues will erode at an average rate of -1% per year, in line with the general trend observed across Western Europe as eyeballs and ad dollars gradually shift to digital formats.
OOH media and cinema suffered the worst revenue declines in 2020, as traffic plummeted during both the lockdowns and movie theaters are set to remain closed through at least mid-June 2021. Advertising activity eroded by -21% for traditional and digital OOH formats, and by -54% for cinema. 2021 is expected to bring only a moderate recovery, +5% to +6%, as restrictions on mobility remained in place through the beginning of the year.
Radio and print ad revenues also declined by double-digits, -17% and -12%, respectively, and will see some degree of low to mid-single-digit growth in 2021. In total, linear net advertiser’s revenues will grow by +6% in 2021 to reach 1.6 billion euros ($1.8 billion), 90% of the pre-Covid market size.
Total digital advertising sales are expected to increase by +19% in 2021 on a full-year basis to reach 3.3 billion euros ($3.7 billion), a 67% market share (Western European average: 62%).
Digital video formats have benefitted from a lasting boost in consumption under COVID, driving to a +19% growth in 2021 advertising revenues. Social media was also very resilient through the Covid crisis, with advertising revenues rising by +13%, and is anticipated to see continued strong growth this year (+17%). Search, which accounts for around 40% of the digital ad market, saw a rise of +7% last year and will accelerate by around +10% this year. The pace of digital growth is expected to gradually slow down over the next few years as digital tops 70% market share.