The world has become a tougher place for brands this year. Brands are worried about digital transformation and intensifying competition. But that hasn’t translated into any slowdown in global adspend, as advertisers have found it even more important to invest in their brands.
For the past year we’ve been asking our key national and international clients how confident they are about growth in their category in the coming year. Over this time their responses have become considerably less positive. On average they still expect their industries to grow, but there are fewer optimists and more pessimists.
It’s no surprise that clients are getting worried. Brands in all categories are having to cope with rapid changes in consumer behaviour and the growth of agile new competitors, both enabled by new technology. Consumers are socialising differently, communicating differently, researching differently and shopping differently. Meanwhile it has never been easier to launch a new brand and shake up complacent industries.
A crisis of confidence
Clients in almost every category have become less confidence about the prospects for category growth. On a scale from 0 to 100, where 0 is completely negative, 50 is neutral and 100 is completely positive, the average response to our surveys dropped from 67 last year to 57 this year. The exception was finance, where – internationally at least – confidence improved. We don’t have the data to drill down to the national level, but I’m sure the picture would be very different in the UK, where the City faces continued uncertainty in the face of Brexit.
The food and drink category has been the most stable, with barely any change in confidence. The biggest drops came from telecoms and automotive brands. Automotive clients remain positive, but telecoms clients expect no growth on balance for next year, and the same is true for FMCG and retail clients.
The drive towards investment
Despite all this uncertainty, advertisers are having to invest more in their brands. The new start-ups are ramping up their own marketing efforts, and established companies are having to intensify their own communications in response. In an environment of uncertain growth and intense competition, consumer preferences are up for grabs. Strong brand communication is more important than ever, both for established brands and rising stars.
That’s why we expect growth in adspend to continue unabated over the next few years. In our latest Advertising Expenditure Forecasts report, which we published on 4 December, we predict that global adspend will grow 4.1% next year, up slightly from 4.0% growth this year. And despite advertisers’ rising concerns about the future, we think their spending will maintain this steady pace with an average annual growth rate of 4.1% out to 2020.
We don’t think this growth will be evenly distributed, however. After several years of rapid growth, the ad market in the UK has been struggling with the slowing economy, gathering inflation, and political uncertainty over the mid-year elections and Brexit negotiations. We estimate that UK adspend will be up only 0.7% this year. But even here the same pressures that are driving global growth will lead to steady recovery. We forecast 1.8% growth in UK adspend next year, building up to 5.1% growth by 2020.
Vittorio Bonori is global brand president at Zenith