Blame It on Rio: Brazil Clouds GroupM Global Ad Forecast

'Recent Political Convulsions' Rocks Confidence in Olympic Ad Spending

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A cyclist rides past military soldiers who are standing guard in front of Olympic Park in the Barra da Tijuca neighborhood ahead of the 2016 Olympic Games in Rio de Janeiro, Brazil, on Sunday, July 24, 2016.
A cyclist rides past military soldiers who are standing guard in front of Olympic Park in the Barra da Tijuca neighborhood ahead of the 2016 Olympic Games in Rio de Janeiro, Brazil, on Sunday, July 24, 2016. Credit: Dado Galdieri/Bloomberg

WPP's GroupM is downgrading its ad-spending forecast for 2016 due in part to "recent political convulsions" rocking confidence in ad spending at the Olympic Games in Brazil, according to the company's new global ad spending forecast.

For 2016, the media agency network is predicting a 4%, or $20.5 billion, increase in global ad spending, down from the 4.5%, or $22 billion, increase it predicted in a previous forecast.

"After a slow growth in 2015, the communicatons market is feeling the effects of economic crisis in 2016," the company said in its latest forecast. "Advertisers' budget cuts have had a bigger impact on traditional media. High expectations surrounding the Olympics did not materialize and, unlike the World Cup '14, sponsor investment was lower. The events have always had a great difference of attractiveness to the population, but political moment has certainly overshadowed the Games and pushed away advertisers concerned about ratings and corporate images."

The company is downgrading Brazil from a 7% to 1% uptick in spending, and also cites reduced growth in China, from 9.1% to 6.6%, "as the slowdown in fixed investment and profits affects consumer demand."

Global ad-spending predictions for 2017 are less grim, especially when combined with spending on other marketing services.

The 2017 ad volume prediction of $552 billion, when combined with other marketing services, pushes total marketing services expenditures worldwide past $1 trillion for the first time, the company said in the report.

Still, ascendant ad growth is not in adland's future. "The combination of global economic headwinds coupled with moderate domestic growth, as well continued procurement pressure to extract media efficiencies and cost savings, will confine ad market potential to its current low-single-digit growth levels," the company said.

For the U.S. specifically, the network is revising its 2016 ad-spending forecast upward 400 basis points to 3.1% growth, driven primarily by a healthier TV marketplace, the company said. TV spending in 2016 is expected to increase 3.4%, from both local political spending and national TV spending.

In 2017, however, the company is predicting a slight decline in growth to 3%. Digital investment will continue at three times the rate of overall advertising spending, which is lower than double-digit growth trends in the past. Growth in TV ad spending is expected to slow.

China had dominated as the region leading ad growth since 2007, but this year will cede that role to the U.S., the company said. Despite a slowdown in 2016, GroupM is predicting 7.0% ad growth in China in 2017, "as advertising has ample fundamental support from persistent consumer confidence and rising expectations, and vigorous urbanization." The forecast is based on a "new normal," which means the economy is growing at a lower but sustainable rate, according to GroupM China.

India is projected to rise as the tenth $10-billion-dollar-plus ad market in 2018. "Supported by stable finances, sustained urban demand and important reforms, India remains the fastest-growing larger ad economy at a forecast annual run-rate of 14%-to-15%," according to the report.

By category
Digital accounted for 28% of measured global ad spending in 2015. That's expected to grow to 31% in 2016, and exactly one-third in our in 2017. "The rapid rise of programmatic ad placement was the leading theme in the GroupM network sweep that produced this forecast," the company wrote in the report. Shifts in spending in China also contributed to the forecast.

"Digital advertising will we think furnish 99% of net ad growth in 2016, a second successive exceptional year brought about by the rapid transfer of investment in China from linear TV to address the still expanding online audience, especially mobile, which is vigorously recruiting older and lower-income groups."

Print media continued to lose most share to online spending, with newspapers and magazines expected to drop two points to account for 17% of global ad spending in 2016, and drop 1.4 percentage points in 2017.

Traditional TV is only losing about a point a year in terms of market share.

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