GLOBAL ECONOMIC RECOVERY BRINGS RECORD AD MARKET GROWTH

MAGNA - Mediabrands

GLOBAL AD MARKET: +14% TO $657 BILLION

As the economy recovers faster than expected globally (GDP +6%) and in most markets, so do marketing activity and advertising spending. With the added driver of rescheduled international sports events, MAGNA forecasts global all-media advertising spending to grow by $78bn (+14%) to $657bn in 2021, a new all-time high. MAGNA also raises its forecast for advertising market growth in 2022 to +6.6% (previously +5%).

Economic recovery will lift all boats, but the contrast has never been wider between digital ad sales accelerating (+20% to $419bn) and linear ad sales (linear TV, linear radio, print, OOH, cinema) which are barely stabilizing (+3% to $238bn after 2020’s -18% decline). COVID may be receding in most markets but the changes to lifestyles, media consumption and business models continue to fuel an acceleration in the adoption of digital marketing from both national consumer brands and small, local, and “direct” businesses.

All 70 ad markets monitored by MAGNA will grow to some degree in 2021 and 2022.

Nearly all digital ad formats globally will grow by double-digits in 2021 as total digital ad sales will account for 64% of global all-media ad spend. They will reach two-thirds of all advertising sales in 2022. The explosion of ecommerce will boost search by +20% to $200 billion, while growing marketing adoption and media consumption will drive social media by +26% to $119 billion. Video ads will grow by +24% to $57 billion as short-form. Out-stream video and static banners may grow at a more subdued pace (single-digits) due to the increasing limitations to tracking and targeting on websites (on Safari and soon Chrome) and apps (on iOS14).

 

CEE OVERVIEW

Media owners advertising revenues will increase by +11.6% in Central & Eastern Europe (CEE) this year (2021) to reach $19.7 billion, up from just $17.7bn in 2020. This will represent the best performance for Central & Eastern Europe since 2008’s pre-recession growth.

Digital advertising sales will surge ahead, growing by +17% in 2021 in Central & Eastern Europe, a significant acceleration after 2020’s +7% slowdown. Mobile advertising spending will grow by +24% to reach $7bn (nearly 70% of total digital budgets). Low-funnel digital ad formats that target consumers closer to purchase decision have been outperforming digital brand advertising globally, and this trend will continue throughout 2021 in Central & Eastern Europe. As a result, digital growth will be driven by Social Media (+26%), Search (+17%), and Digital Video (+15%). This compares to static display banners and other digital formats, which will remain flat this year despite an extremely weak growth comparison (-8.4% growth in 2020).

Meanwhile, linear ad sales in the region (TV, print, radio, OOH) will grow by +6% to $9.6 billion. This will leave total linear spending 6% below the pre-COVID market size (2019).

Television ad revenues will grow by +5.4% in 2021 to reach $7 billion, representing 36% of the total advertising market in the Central & Eastern European region. The TV market will have a few tailwinds in 2021, such as the Tokyo Olympics that may boost TV spending from some verticals in some markets (e.g. betting, finance, drinks, technology). By 2025, television will represent just 28% of total budgets compared to 38% in 2020.

Print advertising is on the decline in the region, and while COVID accelerated the decline of print advertising spending, the extremely easy growth comparison in 2020 means that print will be flat (+0.5%) in 2021 rather than continuing to decline. By 2025, print advertising will represent just 2% of budgets as everything loses share to digital formats. Radio advertising spending will grow by +5.4% this year, bouncing slightly following 2020’s terrible -22% performance, but this will still leave it far short of its 2019 total. Out of home will see tremendous growth this year (+17%), nearly as high as digital advertising growth. In 2020, OOH spending fell by -25% and MAGNA doesn’t expect OOH to regain its prior spending totals until 2025 as consumers and advertisers permanently change their habits. Finally, cinema was the hardest hit of all ad formats during the COVID crisis, down by -52%, and while spending will bounce this year (+19%), this will only bring it to 57% of its 2019 total.

All markets in the Central & Eastern European region will grow in 2021, with the strongest growth rates coming from Ukraine (+17% amidst strong economic inflation), Latvia (+15%), Hungary (+14%), and Turkey (+14%). Slower growth will come from Kazakhstan (+5%), Croatia (+9%), and Serbia (+10%). While some of those increases such as Ukraine are primarily driven by inflation, the recovery across the region from the COVID crisis has been faster, more robust, and more sustained than previously anticipated.

Looking forward to 2022 and beyond, CEE advertising sales will expand by +4.5% annually through 2025 as growth normalizes following the wild swings because of COVID. The total CEE market will reach $23.5bn by 2025, significantly above 2019’s total. Linear media, however, will not regain its 2019 total at any point in the forecast period. The growth is entirely driven by digital budget expansions.

In Serbia, the advertising market will grow by +10.1% this year, to reach EUR 137 million ($156 million). While this will not quite offset the losses in 2020 (-12.9%), it will come close to doing so. Serbian GDP is expected to grow by +5.1% on a real basis, following a resilient performance in 2021 of -1.1%. COVID cases have dropped precipitously in the market, with new daily cases around 100 per day, down from a peak of ~7,500 at the end of 2020. Furthermore, around 40% of the Serbian population has been vaccinated as of June 2021, higher than the Central & European average. In this environment, linear advertising formats will bounce by +8.1% to represent 74% of total budgets. While this doesn’t offset the 2020 weakness (-17.2% growth for linear formats), linear hasn’t been the strength of the Serbian advertising economy for a while. Spending on digital advertising formats will increase by +16.4% to reach 26% of total budgets, with growth led by spending on mobile devices (+27% to reach 60% of total digital spending).

The Croatian advertising market declined by -11.4% in 2020, falling to HRK 1.4bn ($206 million). Croatia’s economy is expected to shrink by -12% on a real basis, i.e. far worse than the overall CEE average. Furthermore, nominal GDP is similar as inflation is not a significant driver in the Croatian advertising economy. Digital advertising formats increased by +2%, driven by search (+2%), video (+4%), and social (+14%). Linear media, on the other hand, declined by -15%: television (-10%), print (-30%), out of home (-29%), and radio (-14%) will all post double-digit declines in ad revenues. In 2021, the Croatian advertising economy is expected to recover by +7%. While this is substantial growth, it will regain only a small portion of the lost spend from 2020. In fact, total ad spend will not pass the 2019 high until 2023.

Slovenia’s advertising market will grow by +10.2% in 2021 to reach EUR 187 million ($213 million). This follows 2020’s -10.4% performance and will essentially undo all the damage caused by the COVID crisis to overall advertising spending. GDP in Slovenia is expected to bounce significantly this year (+7.2% on a nominal basis), because consumers are slowly returning to their normal consumption patterns. New COVID cases are decreasing, and are down below 300 per day, and the percent of population vaccinated continues to increase. Vaccinations have reached 35% of the population as of June 2021, as is a typical level for many Central & Eastern European markets. As has been seen in markets like the US, UK, Israel, and the Middle East (with vaccination rates above 50%), Slovenia is approaching the level of vaccination where COVID activity significantly declines. In this environment, linear advertising spending will increase by +8%. This will not offset the damages of 2020 (-14.8%) but will still represent the best linear advertising spending performance in Slovenia since 2010. Digital advertising spending will increase by +15% to reach 30% of total budgets. Digital advertising will continue to outperform, and by 2025 will surpass 40% of total budgets in Slovenia.

Bulgarian media owners’ advertising revenues will grow by +10.1% this year to reach BGN 561 million ($327 million). That follows 2020’s -5.0% performance, so 2021 growth will more than offset the losses in advertising spending during the COVID crisis. Bulgarian GDP is anticipated to grow by +13.3% on a real basis this year, following 2020’s weak performance (-10.8%). New COVID cases in Bulgaria have dropped significantly in the past few months, to around 250 per day, down from a peak of nearly 4,000 per day in March of 2021. However, only 12% of the population is vaccinated, which leaves the market vulnerable to another COVID surge in the fall if vaccination totals can’t increase before then. In this environment, linear advertising revenues will increase by +6.1%, not quite offsetting the losses in 2020 (-9.8%). Television will increase by +6.1% in 2021 to match 2019 totals, but print (-5%), will continue to slide, and it will take a few more years for OOH to recover from the damage caused by the COVID crisis. Digital advertising, on the other hand, will power forward, growing by +20.4%. This will be driven by mobile devices, which will see ad spending grow by +28% to represent 73% of total digital revenues. By format, search (+17%), video (+16%), and social (+29%) will lead the way on growth. Digital advertising will continue to outperform linear formats, and by 2025 will represent 40% of total budgets in Bulgaria, up from 30% this year in 2021.