Global Advertising: Advertising Hotspots

Global advertising is growing in line with GDP for the first time since 2000. But which of the world's major advertising markets is growing the fastest, Jason Deign asks.

The lack of an Olympic Games, US election or European football tournament means worldwide ad growth will not be as impressive this year as last.

But last year's upswing, which meant advertising grew as a proportion of world GDP for the first time since 2000, was no fluke.

ZenithOptimedia's annual forecast of the world's advertising markets predicts the industry will grow ahead of global GDP until at least 2007.

By then it should represent slightly more than 1 per cent of global GDP, which is where it was in the pre-bubble 90s.

Carat is predicting 4.9 per cent growth this year and Initiative Futures is betting on a 5.8 per cent rise, to $362 billion. This will be driven by general growth in the global economy and the internet's contribution to growing the advertising pie.

Plus, there is the fact that advertising expenditure always follows the ups and downs of the economy in an exaggerated fashion. What we are seeing is "classic behaviour", ZenithOptimedia's head of knowledge management, Adam Smith, says. "Advertising always overshoots GDP."

Here's how the world's top ten countries measure up.

With more than 40 per cent of the world's media expenditure in 2003, what happens in the US dictates the health of the ad market worldwide.

Right now, things are looking good - just about. A weak dollar has helped exports. Unemployment is down. Wages are up. Manufacturing and other sectors are expanding. And as a result, both consumers and business leaders are feeling confident.

Universal McCann foresees domestic adspend rising 6.5 per cent in 2005 as businesses shake off the siege mentality of the past few years and become more free with budgets. ZenithOptimedia's forecast is more cautious, up 0.1 per cent to 4.3 per cent. However, there is still much uncertainty over how President Bush will manage the economy in his second term.

Alan Greenspan, the chairman of the Federal Reserve, has already sounded alarm bells over a budget deficit which reached a record $412 billion in 2004, or around 7 per cent of GDP, leaving the country with some $8,000 billion of national debt.

In addition, observers worry that ongoing rises in consumer prices are likely to trigger hikes in the interest rate. For the time being, though, industry leaders expect to see continued growth at least through to the third quarter of this year.

"If one was to refine the components of the economy, it's still pretty good," Smith says. "We still have growth in consumer demand. Branded-goods advertisers are having to counteract the power of the retailer. These are favourable advertising conditions."

Will the economy hold up, though? Smith says: "We've been trying to predict advertising for 20 years and it's impossible to predict a recession. It just happens and happens quickly. But my own guess is that there's no more than a 10 per cent likelihood that these figures will be wrong."

Japan's position as the second-largest advertising market in the world seems to be unassailable for the time being.

The country spent more than $36 billion on ads in 2003 and this looks set to grow to nearly $42 billion in 2007, more than twice the amount predicted for the UK, which ZenithOptimedia believes will overtake Germany in two years' time.

And all this despite a GDP growth which the Economist Intelligence Unit puts at just 1.7 per cent this year.

That is not all. The country's manufacturers are having to cope with increasing costs and decreasing retail prices. Consumers, meanwhile, are saddled with massive mortgage debt and the prospect of higher pension payments, although only 10 per cent take out loans.

This year sees the end of outdoor cigarette advertising in Japan, following a broadcast ban in 1998 and a clampdown on press ads last year. At the end of next year, tobacco sponsorship will be banned, too. Meanwhile alcohol advertisers follow voluntary TV restrictions. Automotive manufacturers such as Toyota, Honda and Nissan figure highly among Japan's top advertisers, although the sector as a whole spends less than others such as cosmetics or food.

A lacklustre economy in Germany makes it the sick man of European advertising, dragging down the entire region in ZenithOptimedia's forecasts.

The agency puts the German advertising market's net growth at just 0.8 per cent this year, rising to 2 or 3 per cent in the next couple of years.

Initiative goes even further and predicts that the German market will shrink by 1.9 per cent, losing its position at the head of the European league table to the UK.

This is disappointing after gross advertising hit 5.8 per cent (according to ZenithOptimedia) last year, marking its second-highest level ever.

However, ZenithOptimedia notes that this was in no small part owing to high media discounts, and puts the net rise at only 1.5 per cent.

Going forward, the Economist Intelligence Unit believes income tax cuts will help consumer spending but could be partly offset by health insurance and tobacco tax hikes. So things should get better, but not much.

Bumper growth in the UK last year (7.8 per cent - up to around mid-90s levels) will be followed this year by 4.9 per cent growth, drifting down to around 4.4 per cent in 2007, ZenithOptimedia says. (Initiative puts this year's growth at 5 per cent.)

The internet is by far the fastest-growing medium, expected to rise by 18.7 per cent this year and already commanding 2.9 per cent of adspend.

This is ahead of cinema (1.5 per cent) and not far off radio (4.3 per cent).

The second-fastest-growing medium, outdoor, will have benefited from the general election, but others could easily suffer because of the six-week advertising blackout imposed on COI Communications, the UK's second-largest advertiser.

Finally, upheaval is afoot in the country's biggest adspend category, newspapers, with the growth in freesheets posing a real threat to paid-for titles and many broadsheets moving to a compact format.

Although GDP growth is ahead of the UK at 2.4 per cent, it is "steady as she goes" as far as the advertising market in France is concerned. Zenith-Optimedia puts this year's growth at a modest 3.2 per cent after a less-than-spectacular 4.5 per cent in 2004.

The figures show adspend trailing GDP for the next few years, rather than overtaking it. Initiative's prediction for France in 2005 is even more downbeat, at 1.7 per cent.

As with most other countries, French consumers have not been helped by the high price of oil, which has kept inflation above 2 per cent. TV and magazines dominate the media landscape, with around a third-share of adspend each, but the medium to watch, as elsewhere, is the internet.

Although currently only accounting for 1 per cent of adspend, the internet grew by 55 per cent last year and is the only medium expected to show double-digit growth in 2005.

Trust the Italian ad market to try to outdo everyone else. Whereas the general trend is for advertising to outperform GDP, in Italy the overshoot beggars belief. GDP and consumer spending have barely hit 3 per cent in the past ten years, but throughout that period, adspend rocketed to 12 per cent (in 2000) and plummeted to -6 per cent (2001).

This year, ZenithOptimedia predicts a 5.8 per cent rise on GDP growth of around 1.8 per cent, less than inflation. TV takes the lion's share (54 per cent) of adspend in Italy, while radio is the fastest-growing medium, estimated to rise by 16 per cent this year.

A cabinet reshuffle has put off any likelihood of a general election until 2006, but advertising growth is being helped by large distribution chains, which have increased expenditure by 34 per cent in the past two years.

The world's hottest business market is making waves in advertising, too.

ZenithOptimedia sees the ad market in China growing at 16.1 per cent this year and following a similar trend over the next two years, with growth in newspapers, magazines, TV and radio all in double figures (the internet is not currently broken out in the analysis).

Initiative, meanwhile, estimates growth will be more than twice as much, at 37.1 per cent, which will be enough to put China ahead of Germany and the UK, and third worldwide in overall adspend.

The disparity in estimates could reflect problems in working out exactly what is going on in the country. "We try to plot trends but can't as the data changes throughout the year," Smith confesses."Suddenly, they will admit to the presence of a whole bunch of new newspapers with huge circulations. Our figures are likely to be on the low side."

"South Korea's ad market showed steady growth until late 1997," Sue Mosely, the managing director of Initiative Futures, says. "By 2000, the market increased again but since then has shown ups and downs year by year."

The World Cup made 2002 a good year for the country but economic doldrums have followed.

South Korea's ad market shrank last year and is only expected by Zenith-Optimedia to grow by 1.7 per cent in 2005, with the outlook improving on the back of a steady, if slow, economy and gradual improvement in consumer spending.

Last year's 10.4 per cent growth rate will almost halve in 2005, to 5.5 per cent, but the ad industry in Spain can look forward to similar growth in the next couple of years as its economy remains on an even keel.

As elsewhere, the internet is the star performer in Spain, with an anticipated 15 per cent growth this year, although TV takes by far the biggest share of adspend at 41.2 per cent.

Adspend growth in Canada, meanwhile, is hugging changes in GDP and consumer spending and is thus related to events in the US. For the time being, ZenithOptimedia predicts 3.9 per cent growth this year and 4 per cent next, with newspapers taking the biggest share of spend.


Country Adspend in Predicted Change (%)

2003 (dollars m) adspend in

2007 (dollars m)

US 149,756 174,383 16.4

Japan 36,251 41,724 15.1

Germany 18,969 18,492 2.5

UK 16,588 19,712 18.8

France 10,777 11,508 6.8

Italy 8,519 10,635 24.8

China 6,339 12,699 100.3

South Korea 6,513 6,486 -0.4

Spain 6,099 7,326 20.1

Canada 5,749 6,760 17.5

Global 345,509 442,121 28.0

Source: ZenithOptimedia.


Despite the devastation wreaked by the Boxing Day tsunami, Indonesia's ad market is anticipating growth of 28.5 per cent this year. Dean Bramham, the managing director of Leo Burnett Kreasindo, says: "It's a country with a lot going on; the fourth-largest in the world by population, with 17,500 islands." The economy is picking up,the banking sector has been reformed to give people access to credit and foreign investment is flowing in. With 220 million potential consumers, Bramham says: "I'd be surprised if any of the multinational agencies don't put on at least 20 per cent growth."