Canadian ad spending grew 4.4% to $16 billion this year—slightly behind the global average of 5.2%—but “economic headwinds” will cause it to slow to 3.8% next year, according to the latest ad spend forecast from Magna, IPG Mediabrands’ intelligence and forecasting unit.
The Magna report lists trade uncertainty with the U.S., relatively low oil prices, a slowdown in the housing sector tied to stricter mortgage lending and greater household debt, among the factors that will cause advertisers to rein in spending next year.
The slowdown will be felt most acutely among non-digital advertising channels like TV and print, which Magna projects to fall by a combined 6% in 2020. The report identified Canada as one of the world’s fastest declining markets when it comes to non-digital ad spend, with next year’s expected decline marking the eight straight year it has fallen.
Digital investment, however, will grow by 10% next year, led by double-digit increases in both social media spending (+14%) and digital video (+13%), complemented by a 9% increase in search.
“Digital advertising is leading the way in Canada with social, video, and search driving increased spend,” said Treva Goodhead, VP of investments at Magna Canada. “Traditional non-digital channels continue to be challenged as Canadians change their habits with new mediums like OTT services and media companies raise their advertising rates.”
While Canadian TV benefited from the Toronto Raptors’ historic NBA championship run, it wasn’t enough to compensate for Canadian teams’ futility in the NHL playoffs and the absence of the Winter Olympics.
Magna said global TV ad sales were down 4% this year, the medium’s worst performance in a decade, with rate increases no longer able to offset declining audiences. This was particularly true in an “odd-numbered year,” with no global sporting events such as the Olympics or World Cup or other key drivers such as a U.S. election.
Magna says the return of the Olympics in 2020 (which take place in Tokyo) won’t be enough to prevent TV ad spending from dropping by 3% next year.
TV is also challenged by the fast-growing market for over-the-top streaming (OTT) services like Netflix and Amazon Prime Video, which were joined in November by new services such as Disney+ and Apple TV+.
Nearly two-thirds of Canadian households (60%) currently have an OTT subscription, with Netflix leading the way at 55% penetration. That’s far ahead of Amazon Prime Video at 19% and the made-in-Canada service Crave at 13%.
Magna is also calling for print spend to drop 16% next year amid declining circulation and stagnant pricing, with the radio market—the world’s third largest in terms of market share, at 8%—falling by 4%.
The out-of-home ad market will grow by 2%, which Magna attributes to the continued rollout of new digital inventory, now approaching 20% of all out-of-home inventory in the country.
The view from Zenith…
Zenith also released its global ad expenditure forecast on Monday, which called for a 4.3% increase in spending next year, to US$666 billion. That is the same as the network’s September projection.
However, it notes that the projected increase is barely above this year’s 4.2% rise, calling it a “big disappointment” in a year filled with marquee advertising events including the Olympics, UEFA Euro 2020 and the U.S. presidential election—which it expects to add US$7.5 billion in advertising.
Zenith blames much of the shortfall on the U.S. China trade war, which it said is disrupting economies around the world and will “prevent the global ad market [from] reaching its potential” next year.
North America accounted for 39.7% of all global advertising expenditure this year, and despite the rise of markets like China, Zenith is predicting that number to grow to 40.3% by 2022.
GroupM, meanwhile, is calling for global growth of 3.9% next year and growth in the 3-4% range through 2024 in its “This Year, Next Year” report.
In his assessment, GroupM’s global president of business intelligence Brian Wieser said that digital-first brands “endemic” to the internet—a group comprised of Alibaba, Alphabet, Amazon, Booking.com, eBay, Facebook, IAC, JD.com Netflix and Uber—are driving much of the global growth.
All of those companies spend in excess of US$1 billion a year in advertising, he said, accounting for a combined $36 billion in spending in 2018, up by 25% over 2017. “Growth in 2019 is likely to be very similar,” he said.
Internet related advertising is now “unambiguously the most important medium globally,” said Wieser, with a projected $326 billion in ad revenue next year (about 52% of the global total).
“Digital is taking share of advertising in almost every country in 2019 and should do so in all of them in 2020,” said Wieser, noting that while spending by digital-first brands will slow as they mature, they will rely on digital to complement brand-building activities that are often centred around TV and other offline activities.
GroupM lists Canada eighth among the top 10 nations contributing to global ad growth in 2020, although its $465 million in incremental spend is dwarfed by the U.S. ($18.4 billion).