Global adspend recovery weakened by Japan and Middle East

ZenithOptimedia has downgraded its global adspend forecast from 4.6% growth this year to 4.2%, in the light of the "devastating earthquake" in Japan and the political turmoil in the Middle East playing out on the world stage.

Adspend prediction: ZenithOptimedia tones down optimism
Adspend prediction: ZenithOptimedia tones down optimism

The Publicis Groupe-owned global media agency indicated that "these events had immediate consequences for advertising in the affected markets" and pared its 2011 adspend forecast to $471bn (£288bn).

In Egypt – by far the largest ad market to be caught up in the Middle Eastern uprisings – ZenithOptimedia said that "there was almost no advertising on television during the revolution", and, in the aftermath, advertisers have been very careful about the content and placement of their messages.

The network also recorded that Japanese broadcasters replaced almost all commercial ad slots with public-service announcements for weeks after the earthquake, and blackouts and distribution problems will hinder media consumption for months to come.

The agency said it did not expect these shocks to derail the global recovery in the long term. However, it expects some of the missing advertising to reappear later in the year, followed by strong growth in these markets in 2012 thanks to the easy comparison with the first quarter of this year.

Japan is forecast to shrink 4.1% this year then grow 4.6% next year, while Egypt follows this year’s 20% drop with a 12.1% recovery in 2012.

The agency has increased its 2012 forecast from the 5.2% it indicated in December to 5.8%.

This it said is partly the result of the rebound in Japan and the Middle East, and partly thanks to further strengthening in Western and Central and Eastern Europe, where advertisers are becoming "more confident of the long-term economic prospects".
The agency said that the large disparity in growth rates between developed and developing markets will continue.

It forecast North America to grow by an average of 3.1% a year between 2010 and 2013, and Western Europe to grow by 3.5%.

Japan would grow just 0.7% a year, though this obscures the big drop in 2011 followed by the recovery of lost ground over the next two years.

It also forecast just 0.1% annual growth in the Middle East, as advertisers tread carefully amid political instability.

But Latin America is set to grow by 8.2% a year, Central and Eastern Europe by 12.4%, Asia Pacific by 6.6%, and Asia Pacific, excluding Japan, to grow by 10.2%.

The ten largest contributors to global adspend growth (2013 v 2010)
    Adspend growth
1 USA  14,238
2 China  10,791
3 Russia  6,880
4 Brazil  3,318
5 India  2,493
6 Indonesia  2,422
7 UK  1,928
8 Germany  1,826
9 South Africa  1,552
10 Australia  1,462

Source: ZenithOptimedia
US$ million, current prices. Currency conversion at 2009 average rates. Adspend growth

Developing markets – which it defined as everywhere outside North America, Western Europe and Japan – will increase their share of the global ad market from 30.9% in 2010 to 35.1% in 2013.

ZenithOptimedia said there are now two "developing" markets in the world’s top 10 ad markets, but there will be three in 2013. China (which it forecast would grow at an average 13.6% a year to 2013) will overtake Germany (which would grow at an average 2.4%) to become the world’s third-largest ad market in 2011 and stay at that position throughout the forecast period.

China is currently just over half (54%) the size of Japan, the second-largest ad market, and will be just over three-quarters (77%) of its size in 2013.

Brazil (with 15.4% annual growth) will overtake France (with 2.9%) to take sixth place in 2011. Russia (23.3% growth) will rise from 12th place in 2010 to 10th in 2011, eighth in 2012, and then seventh in 2013.

The agency said that the sheer size of the US – 3.5 times the next-largest market – means it will contribute the most new ad dollars to the global market over the next three years ($14.2bn or £8.7bn), despite its slow growth.

However, the next five-largest contributors are all developing markets: China (which contributes almost as much as the US, $10.8bn or £6.6bn) Russia ($6.9bn or £4.2bn), Brazil ($3.3bn or £2bn), India ($2.5bn or £1.5bn) and Indonesia ($2.4bn or £1.47bn).

Overall, developing markets will contribute 62% of new ad dollars over the next three years.

Advertising expenditure by medium
  2009 2010 2011 2012 2013
Newspapers 97,421 95,235 92,997 91,867 91,246
Magazines 43,856 43,768 43,246 43,007 42,835
Television 165,502 180,315 190,169 203,698 215,980
Radio 31,672 31,995 32,828 34,077 35,243
Cinema 2,091 2,308 2,451 2,606 2,764
Outdoor 28,184 29,456 31,172 33,306 34,946
Internet 54,230 63,049 71,623 82,358 94,467
Total 422,956 446,126 464,486 490,920 517,481

Source: ZenithOptimedia
US$ million, current prices Currency conversion at 2009 average rates.

The network also expects the internet will overtake newspapers to become the world’s second-largest advertising medium during 2013. The agency indicated that this is the first time this has fallen within its forecast period.

Newspaper ad expenditure was still 51% larger than internet ad expenditure in 2010, but newspaper expenditure is shrinking by 1.4% a year as circulations continue to fall in developed markets, and readers migrate to the internet.

Internet advertising continues to grow at "breakneck pace", at a forecast average rate of 14.4% a year between 2010 and 2013.

The agency forecast is that newspaper ad expenditure will fall from $95.2bn (£58.2bn) in 2010 to $91.2bn (£55.8bn) in 2013, while internet ad expenditure rises from $63bn (£38.5bn) to $94.5bn (£57.8bn) over the same period.

This year, display advertising has taken over from search as the main driver of internet ad growth, according to the agency.

Display, broadly defined to include online video and social media, has been invigorated by fast-growing sectors.

The agency said that affordable, do-it-yourself tools to create streaming video ads have opened online video to small and local advertisers.

Social media sites now attract huge audiences, though click-through rates and therefore costs are often very low. ZenithOptimedia said it expects global display ad expenditure to grow at an average of 16.4% a year to 2013, while paid search grows by 12.8% and classified by 10.2%.

Television remains by far the largest medium and is continuing to increase its market share. Television attracted 40.4% of global ad expenditure in 2010, up from 37.3% five years earlier, and is expected to account for 41.7% in 2013.

According to the agency, bigger and higher-quality displays, more channels delivered by digital television, and the convenience of PVRs, mean people are watching more television than ever.

It forecasts global television ad expenditure will rise from $180.3bn (£110.3bn) in 2010 to $216bn (£132.2bn) in 2013.

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