Dentsu Group Strengths

True Global Expansion Including Japan

Column: The Outlook for Global Advertising

Jerry Buhlmann
CEO, Dentsu Aegis Network
Executive Officer, Dentsu Inc.

Globalization and marketing convergence remain the predominant themes in global advertising, and they continue to drive trends in advertising expenditure across geographies and media channels.

Globalization

Globalization is being driven by a number of factors, in particular the need by businesses to access consumer demand in developing economies, by businesses scaling to mitigate the cost of complexity and by increased outsourcing of resources to high skill and low cost markets. This is supported by an increasingly benign cross border trading environment.

In advertising, these forces of globalization are even stronger, as marketers of global businesses require a rapid exchange of good innovation and ideas, consistent processes delivered globally and more effective structures for accessing talent and shared knowledge. In this environment, advertisers therefore need to evaluate different markets and regions to judge where future growth will come from, which will enable them to prioritize their resources accordingly.

Marketing convergence

Marketing convergence, the coming together of a range of platforms and channels particularly in digital, has swept away geographic and technological borders. People and technology are seamlessly blending together, allowing an unlimited access to information, data and connections.

Furthermore, the emergence of scaled infrastructure media owners, particularly in the United States and China, is driving social media, mobile, video and e-commerce on a convergent basis and at speed. These media owners base their business models on driving vertically integrated revenue streams through which their products can offer life management for consumers. As a result, all consumers’ communication, entertainment, friends, photos and transactions are now all on one platform, as they become increasingly comfortable engaging with brands in these channels.

Global adspend forecasts

Consequently, marketing convergence in particular will continue to be a major driving force for the global advertising industry in the future. Digital advertising spend is expected to grow at three times total advertising spend this year, driven by an increasing penetration of broadband and high speed mobile, by growing consumer trust in online transactions and by continued growth in mobile devices, particularly smartphones. As evidence of this, advertising spend in both social media and mobile is expected to grow by 50% this year.

As a consequence of these dynamics, global advertising revenue is expected to accelerate by 5.0% in 2014 to U.S.$554.2 billion, according to Carat’s global advertising expenditure forecasts, which take into account 59 countries around the world. This is a notable increase in pace from the 3.6% growth seen in 2013.

Adspend forecasts by region

In Western Europe, Carat predicts a return to positive territory in 2014, with a predicted 2.7% growth. There is continued momentum in the U.K., with 7.5% growth predicted, while Germany and Spain are expected to recover from negative growth in 2013 to grow modestly in 2014. In Central and Eastern Europe, advertising spending is expected to grow by 3.5%, supported by strong growth in Russia of 3.9%.

Growth in the United States advertising market is forecast to increase in 2014 with an acceleration in growth of 4.9% boosted by the continued double digit growth in digital media spend. Latin America continues to show the highest growth in advertising expenditures globally, driven by 9.4% growth in Brazil.

Growth in Asia Pacific is forecast to increase by 5.4% in 2014 and the region continues to be driven by China, where growth is expected to be 7.6%. In Japan, the effect of Abenomics and the selection of Tokyo to host the 2020 Olympic and Paralympic Games should boost ad spending in this country, up an expected 2.0% in 2014 and 1.7% in 2015. Japan is likely to show a year-on-year increase for the fourth consecutive year.

Over the long term, the focus of attention is likely to be on the United States and China, the first and second largest economies in the world. China still has massive potential and is a more mature economy than 10 years ago, with long-term sustainable growth a certainty. The United States, as a low cost deregulated free market economy, remains an attractive place to do business for many businesses.

Jerry Buhlmann
CEO, Dentsu Aegis Network
Executive Officer, Dentsu Inc.

1989
Founder of BBJ
1999
Appointed MD of Carat International, following acquisition of BBJ by Aegis Group plc
2003
Appointed CEO of Aegis Media EMEA
2008
Appointed CEO of Aegis Media
2010
Appointed CEO of Aegis Group plc
2013
Appointed CEO of Dentsu Aegis Network and Executive Officer of Dentsu Inc., following acquisition of Aegis Group plc by Dentsu Inc.

Mr. Buhlmann has over 25 years’ experience in media and advertising and worked at Young and Rubicam and WCRS in the early years of his career.