Zenith predicts online video spending is about to boom

The agency's latest forecast also predicts growth in North American ad spending will outpace rest of the world.
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Connected TV and the introduction of ads to SVOD are set to propel growth in online video spending ahead of other digital platforms.

The latest Zenith Advertising Expenditure Forecasts report also predicts that North America will end this year with 12% growth, making it the strongest region globally.

Global ad expenditure is expected to grow by 8.0%, down slightly from the 9.1% growth rate published in December 2021.

Zenith’s forecasts for North America, MENA and Western Europe this year are unchanged at 12%, 7% and 6%, respecitvely. Latin America was downgraded slightly from 9% to 8%, while Asia Pacific was upgraded from 6% to 7%. Severe disruption in Russia and its closest trading partners after the invasion of Ukraine will lead to a 26% decline in adspend in Central and Eastern Europe, Zenith predicts, although most other markets in the region will continue to grow.

Higher prices in traditional channels are accelerating the shift to digital alternatives. But increasing demand from advertisers is also pushing up media inflation, particularly in television, where the supply of audiences is falling steadily as viewers switch to alternatives. While price increases vary country to country, the global average cost of television advertising across all audiences is expected to rise by 11% to 13% this year. Zenith predicts 62% of ad budgets will be spent on digital media this year, up from 59% in 2021. This proportion will reach 65% in 2024.

Online video is expected to overtake social media as the fastest-growing channel for the first time and is now predicted to be the fastest-growing channel over the next three years. Zenith forecasts online to grow 15.4% a year on average between 2021 and 2024, driven by the rapid development of connected TV, ad-funded video-on-demand, streaming and other video formats. Connected TV is now a mainstream video platform in the U.S., with a higher penetration than cable TV, and is a signal of what’s to come in other markets where it is now becoming more established.

The introduction of cheaper ad-funded tiers by SVOD services like Netflix and Disney+ will boost growth further by providing new high-quality environments for brand communication. Mixed video-on-demand models that combined subscriptions with advertising will also help online video audiences continue to grow across the world. Online video adspend is expected to rise from $62 billion USD in 2021 to $95 billion USD in 2024.

Social media spending, which includes video ads in social media feeds, is still expected to grow at an average rate of 15.1% a year between 2021 and 2024. Meta’s share of social media adspend outside China has been falling steadily since it peaked at 89% in 2019, reaching 85% in 2021 as TikTok, Snapchat, LinkedIn and Pinterest gained market share. According to Zenith, social media adspend will rise from $153 billion USD in 2021 to $187 USD billion this year to account for 25% of expenditure on advertising across all media.

Cinema and out-of-home will place third and fourth, averaging 11.9% and 8.0% annual growth between 2021 and 2024 respectively. These are still recovering from the deep losses they suffered in 2020 and 2021 when cinemas were closed, and consumers were confined indoors.

Cinema and out-of-home have a lot of ground to make up, however, and are taking their time to do so. Many brands that were forced to find alternatives, often digital, have found them effective, and see little need to shift their budgets back again. Zenith expects cinema adspend to reach $3.9 billion USD in 2024, well below its pre-pandemic level of $4.8 billion USD in 2019, while out-of-home will reach $45.0 billion USD in 2024, exceeding the $42.3 billion USD it achieved in 2019.

Linear television advertising is forecast to grow by 1.1% a year on average between 2021 and 2024, as price rises continue to compensate for loss of audiences. This ongoing decline in reach and efficiency will drive brands to digital channels, however, including online video. Television’s share of total adspend is forecast to fall from 24.6% in 2021 to 20.8% in 2024, while online video’s share increases from 8.8% to 11.1%.

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