Digital and downturn will transform ad industry, says PwC

17 June 2009

LONDON: Global adspend will not return to the level recorded in 2008 in the next five years, and the advertising industry is also set to undergo a "profound structural shift" as the increased use of digital leads to fewer resources being "wasted" elsewhere, PricewaterhouseCoopers reports.

In its Global Entertainment & Media Outlook 2009–2013, PwC predicts total spending in the entertainment and media sectors – including consumer and advertising expenditure – will increase by of 2.7% annually, to $1.6bn, by 2013.

Spending levels will fall by 3.9% this year, before growing by 0.4% in 2010, and then at an accelerated rate of 7.1% over the next three years.

Asia Pacific and Latin America will be the fastest-growing regions, enjoying upturns of 4.5% and 5.1% in turn over this period, taking total regional revenues to $413bn and $73bn respectively.

Despite this, however, PwC argues "this recession will last longer than previous ones due to a steeper downturn" and that "the impact on consumer spending will be much steeper than in the past." 

Advertising spend will also decline at a compound annual rate of 0.6% during the five-year period assessed by the professional services firm.

Globally, online ad sales are likely to be static this year and next, before seeing an upturn of over 12% for the period from 2011–13.

Television advertising, by contrast, will see revenues contract by 6% over the next two years, before posting an improvement of around 4% over the proceeding 24 months.

Radio and outdoor revenues will similarly fall by over 4% in 2009 and 2010, with consumer magazines off by 6%, and newspapers by over 7%, during this period, before each of these channels returns to moderate growth thereafter.

Online and mobile advertising will also increase their share of global adspend from 12% in 2008 to 19% in 2013, with video game ads recording a compound annual growth rate of 13.8% during this period.

This will be encouraged by an increasing "digital migration", which will see consumers "seek more control over where, when and how they consume content" and "seeking the best value from the choices they make."

Examples of this trend could include making increased use of the "time-shifted viewing" facilities offered by DVRs, higher usage levels of the mobile web, and the continued growth of social networking websites and online video-on-demand services.

As such, PwC argues, "tapping into the massive collective buying-power of online communities” will become "an increasingly central focus of consumer marketing campaigns globally." 

More broadly, marketers will need to "shift their resources from traditional media to new digital media, seeking to reflect and capitalise on evolving media consumption habits."

Overall, it is "not the overall size of an increasingly fragmented advertising market" that matters, but marketers' "ability to use the greater relevance and personalization of advertising enabled by digital to boost their share of overall ad spend."

Furthermore, as "advertisers will be able to achieve the same or better reach and performance for a relatively lower spend", this may ultimately come to "put downward pressure on total global adspend," PwC says.

Data sourced from PwC; additional content by WARC staff