Social media will become the third largest advertising channel in the world

Slight slowdown in the advertising market in Poland

Media agency Zenith has lowered its forecast for growth of the Polish advertising market in 2019 from 3.9% to 3.1%, which is significantly below GDP growth forecasts. Global advertising expenditure will increase this year by 4.4%, and its total will close at USD 640 billion.

Forecast for advertising expenditure dynamics on the Polish market

The dynamics of GDP growth in Poland in the second quarter of the year did not reach the assumed level of +4.5% and stopped at 4.4% year-on-year. Despite this, the good condition of the Polish economy and its resilience to the slowdown observed in the European Union are very positively surprising. The level of GDP dynamics, estimated for 2019 at +4.0% and supported by the new government programs 500+ and the 13th pension for retirees, is currently not at risk.

Polish advertising market in 2019

The observed slight slowdown in the advertising market seems all the more justified because it is related to the so-called high base effect – record growth in advertising investment in 2018, which amounted to as much as 7.7%. As predicted, by 2021 the dynamics are to increase to +4.9%.

According to Zenith's forecasts this year, for the first time in history, the share of local advertising investment in television will fall slightly below 50% and will continue this trend in subsequent years, reaching a 48% market share in 2021. Nevertheless, this channel remains the leader on the Polish market, ahead of the internet, for which a 32% market share is forecast this year and 35% by 2021.

The fastest-growing channels in the advertising expenditure category in Poland are mobile and video, with shares of the online market at 35% and 21% respectively. Their growth is closely correlated with the global boom in social media advertising.

Market shares of the display category are also growing, owing their position to the development of campaigns based on programmatic, which already account for 31% of implementations in this segment and – according to Zenith's forecasts – are to exceed 46% in the display category by the end of 2020.

Among offline media, only in the cinema category are increases exceeding 2% expected this year. Television, radio, and OOH, after a very difficult first quarter of the year and a relatively late Easter period this year, are facing declines in revenue. As a result, the increases forecast for this year in these categories will be respectively: TV (1.4%), radio (1.5%), and OOH (1.8%).

Forecast for the global advertising market

Social media will overtake print

According to Zenith's forecast, this year, for the first time in history, advertising expenditure on social media will exceed advertisers' investment in print media. The share of social media platforms in the global advertising market will increase in 2019 by 20%, reaching USD 84 billion. Financial outlays for advertising in paper newspapers and magazines will fall during this period by 6% to USD 69 billion.

Social media platforms will become the third largest advertising channel this year, with a 13% market share. They will rank just behind search advertising (17% market share) and television (29% of the market). However, the pace of growth in social media advertising expenditure will slow, falling to 17% in 2020 and 13% in 2021, when they reach 16% of global advertising expenditure.

Automation drives social media

Automation of social media campaigns allows brands to achieve growth thanks to the ability to optimize activities for specific business goals. The use of first-party data coming from brands' websites allows for the identification of potential consumers on social media. Advertisers can effectively reach people who are already on the purchasing path, targeting social media activities at users most similar in profile (look-a-like audiences) to previously identified consumers – said Anna Bartoszewska, General Director of Zenith.

The online advertising market is growing continuously

Online advertising expenditure maintains double-digit growth. In 2018, this channel recorded an 18% increase in revenue. For 2019, Zenith forecasts 11%, and in 2021 the growth dynamics will reach 10% annually. The internet's share of global advertising expenditure will increase from 44% in 2018 to 52% in 2021.

The fastest-growing global category of online advertising will be display – understood as traditional display (banners), online video, and social media – for which Zenith forecasts year-on-year growth of 13% by 2021. This is mainly thanks to online video and, of course, social media, which will grow by an average of 18% and 17% annually respectively in the period 2018-2021.

Expenditure in the online video channel is catalyzed mainly by changes in the size and quality of mobile devices, as well as increasing data transmission speeds. The constant presence of ads in the newsfeed no longer surprises consumers accustomed to using social media daily. Importantly, these two categories strongly overlap – video advertising is now an integral and very important part of revenue for social media platforms.

At the same time, revenue from paid search will exceed USD 100 billion for the first time in history this year, reaching USD 107 billion globally. This channel will grow at a rate of 8% in 2019 and 1% annually until 2021, reaching USD 123 billion in that period, or 18% of global advertising expenditure.

The scale of global advertising investment in television will continue to shrink. It will fall from USD 182 billion in 2019 to USD 180 billion in 2021, when it will account for 27% of global advertising expenditure.

Global advertising expenditure grows thanks to the US; Europe and Asia have slowed

The US advertising market currently accounts for nearly half of total global spending on online and offline campaigns. Zenith predicts that this year it will be 48%, and on average over the 3 years from 2018 to 2021, this share will be 46% globally. The main driver of growth will be brands operating in the digital environment and small businesses that have opened up to advertising activities, using the possibilities of precise targeting and geolocation of online campaigns. In the US, advertising expenditure in the small and medium-sized enterprise sector is driven by a high level of consumption, and the announced recession or inflamed trade relations with China have not so far had a negative impact on the level of investment.

While Zenith's forecast, published in January this year and concerning 5.7% growth of the advertising market in 2021, remains unchanged, the agency is lowering its prediction for both European markets (Western and Central-Eastern).

Zenith currently forecasts that advertising expenditure in Western Europe will reach 1.9% growth this year (down from 2.4% announced in the January forecast) and 4.7% growth in the Central and Eastern Europe region (lowered from 6.1% forecast in January this year). This is mainly due to economic indicators which – in key European markets such as Germany, the United Kingdom, or Russia – have noticeably deteriorated. An additional factor is the absence in 2019 of major sporting events such as the Winter Olympic Games or the FIFA World Cup.

Summary

According to Zenith's forecasts, in 2019 advertising expenditure on social media will for the first time exceed investment in print media, reaching USD 84 billion. Social platforms will become the third largest advertising channel in the world, with a 13% market share, just behind search engines (17%) and television (29%). On the Polish market, the growth dynamics of advertising expenditure have been lowered from 3.9% to 3.1%, mainly due to the high base effect after a record 2018. The fastest-growing channels in Poland are mobile (35% share of the online market) and video (21%).

Interestingly, the forecast share of the internet in global advertising expenditure for 2021 will reach 52%, while television revenue in the same period will fall to 27% of the global market.