Social media in-feed ads, online video and other digital formats such as paid content and native advertising are leading the growth in global advertising. Between 2016 and 2019 they will drive 14% annual growth in total display advertising – a category that includes these formats as well as traditional banners – according to Zenith’s new Advertising Expenditure Forecasts, published today. Total display expenditure will rise from US$84bn to US$126bn over this period, accounting for 64% of all the growth in global ad expenditure. By 2019 total display will account for 50.4% of internet advertising expenditure, exceeding 50% for the first time.

Most of this growth is coming from social media (which will grow at 20% a year) and online video (which will grow at 21% a year). Social media is central to many of its users’ digital lives – it’s where they plan their social life, read their news and document their activities – and brands can use it to communicate with them very effectively. And online video is much better at conveying brand values than traditional display formats like banners. These are no longer mutually exclusive categories; indeed video advertising is now central to the growth strategies of most social media platforms.

Paid search and classified are still growing, but are lagging behind

Paid search was the largest internet advertising channel until 2015, when it was overtaken by display. Much of its recent growth has come from innovations in mobile and location-based search, and future growth will come from adapting search ads to voice-activated personal assistants like Siri and Alexa

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. Expenditure on paid search totalled US$78bn in 2016, and we forecast 10% annual growth to 2019, when it will reach US$103bn. Growth in paid search will therefore lag behind growth in total internet advertising, which will grow at 12% a year.

Classified advertising – advertising on dedicated web pages without editorial content, often for cars, house and jobs – was an important part of the early internet, but its share of total internet expenditure has been shrinking for many years as users have turned to free listings, auction sites and other substitutes. In 2016, advertisers spent US$17bn on internet classifieds, and we expect this total to rise by just 7% a year to US$21bn in 2019.

Television and online video consolidate their lead in brand advertising

We distinguish between television and online video advertising because they are distributed differently, generally sold differently and categorised differently by third-party agencies that monitor advertising expenditure. But for many consumers they are beginning to blur together as smart TVs and other devices deliver internet content to households’ main TV sets. Advertisers are also finding that it makes less and less sense to plan television and online video separately: they work best as complements rather than substitutes. Television supplies reach, while online video offers targeting and personalisation. Together they are becoming more important than ever to advertisers seeking to build brands. Stripping out classified and search – which are essentially direct-response channels – television and online video accounted for 48.5% of expenditure on brand advertising in 2016, up from 43.7% in 2010, and we forecast their market share to rise to 49.3% in 2019.

Global adspend to grow 4.0% this year

We forecast that global advertising expenditure will grow 4.0% to US$558bn by the end of 2017. This is down fractionally from the forecast of 4.2% that we made in June. The stronger eurozone economy has yet to feed through to advertising, and we have downgraded our forecasts for seven eurozone markets since then. Mexico’s television market has been disappointingly weak; the extended period of mourning for King Bhumibol Adulyadej has led to a second year of decline for Thailand; and Malaysia’s recovery from the downturn of 2016 has been less rapid than we hoped. These disappointments have been partially offset by the boost provided by Canada’s healthy economy to its ad market, and Russia’s return to full growth after the oil-price crash and imposition of trading sanctions.

Next year we forecast 4.2% growth in global adspend, boosted by the Winter Olympics in Korea, the football World Cup in Russia, and the mid-term elections in the US.

Zenith celebrates 30 continuous years of advertising forecasts

The first edition of the Advertising Expenditure Forecasts was published thirty years ago, in September 1987. The report was originally published by Saatchi & Saatchi, before moving over to Zenith soon after it was created in 1988. Back then the global ad market was a lot smaller – we estimated it at US$187bn, or a third of the current level – and it was overwhelmingly dominated by the US, which accounted for 59% of total spend, compared to 35% today. The birth of internet advertising, now nearly 40% of the market, was still seven years in the future. But not everything changes: even then we were looking forward to a boost from the 1988 Olympics and US elections, expected rapid growth in Asia Pacific outside Japan, and worried about economic problems in Latin America.

“Internet display is coming into its own as a brand-building media, powered by social media and online video,” said Jonathan Barnard, head of forecasting and director of global intelligence at Zenith. “But the distinctions between online video and traditional television are being eroded, and the two work together much better than they do separately.”

“Internet platforms are continually innovating to provide advertisers with new ways of communicating with consumers,” said Vittorio Bonori, Zenith’s global brand president. “But newer doesn’t always mean better, and agencies must use all the data and technology available to them to determine how to combine new and old media to tell brand stories most effectively.”

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