What business prospects does 2007 hold for the world's marketing communications industry?
The bad news is that there will be no bonanza fuelled by the relentless march of online. The good news is that the bottom is not about to drop out of the market.
According to Group M, WPP's media planning and buying arm, the business can expect a slightly reduced total global media investment this year. Nevertheless, its research not only throws up interesting shifts in global advertising's centre of gravity during the coming year (not least the fact that China is now contributing more to global media growth than the US for the first time), but also a surprisingly robust rearguard action by TV in the face of the internet onslaught.
Last year, the world invested around $395 billion in media advertising. For 2007, that investment is expected to show a slight drop, from 6 per cent to 5 per cent. Although this figure is slightly behind global gross domestic product, the report warns against undue pessimism. "This does not signify imminent global recession," it says. "Demand for marketing services - which is 80 per cent based in mature markets - is as strong as ever."
Group M's forecasts are made against the background of a global economy currently growing at about 5.5 per cent in cash terms. However, it suggests a key factor is what happens to commodity prices, which were at the root of last year's inflation problems. "If the world's workshops are paying too much for input, they'll soon get into trouble and the market will correct itself," Adam Smith, its futures director, says. "We will have a more serious problem if inflation stifles Western demand for advertising and everything else before it occurs." Of more immediate concern, however, is what happens in the US, particularly if house prices decline, undermining consumer confidence.
This is reflected in Group M's predictions about the sources of future media advertising growth, which suggest that the emphasis is switching from the Americas to Europe. The dollar's depreciation against most other currencies is cited as a major reason for this. Another is the ongoing problems in Latin America, particularly in Brazil, the region's economic hub.
"It remains among the fastest-growing media markets, but has a GDP problem which is becoming more entrenched," the research claims. Indeed, Brazil's 3 per cent real growth is in marked contrast to that of Russia (6 per cent), India (7 per cent) and China (9 per cent).
There is brighter news for Europe, where an enlarged European Union now contributes 11 per cent of global media growth, even though it accounts for just 5 per cent of the global economy. The current phenomenon is Russia, which represents 45 per cent of Europe's media investment.
"Russia's media has grown quickly," the report acknowledges. "But one can understand why it might not quite keep up with the country's energy and industry-driven economy as a whole."
In Asia-Pacific, 2007 will see China's media growth reflect its emergence as a global powerhouse. It is already contributing 21 per cent of net growth in absolute dollars, compared with the US's 20 per cent. Group M expects them to be neck-and-neck at 18 per cent in 2007, but predicts the US will fall back as the Olympics approaches and the dollar wilts some more.
Besides China, the region's current "tiger" economies are Hong Kong, South Korea and Taiwan. However, Indonesia, Malaysia, the Philippines, Singapore and Thailand are "barely pulling more than their own weight relative to their economic growth", according to Group M's research.
Just what role the internet will play in the media growth of global markets continues to confuse and confound. "The internet's growth must level off somewhere, but it has a habit of beating expectations," Group M admits.
Hard facts are hard to find when it comes to the internet. Research suggests it currently contributes about 20 per cent of world media growth, but accounts for only 6 per cent of media investment. Group M expects the growth figure to reach 27 per cent this year, along with its budget share. However, the percentage is hard to calculate as so much internet activity goes unmeasured. "It is striking that the internet is very much an old-economy medium, barely contributing at all to media investment growth in the emerging world, even allowing for substantial under-measurement there," the research points out.
Curiously, the internet is no longer the largest single contributor to media investment growth in North America. That honour has reverted to TV, thanks to the flourishing number of Spanish language networks. Elsewhere, TV is expected to continue to hold its own, particularly in emerging markets, where it leads measured media growth.
That is not to suggest the internet has reached a plateau. The medium still has much potential to realise in the US, where its 7 per cent share of marketing budgets lags well behind the UK's world-leading 14 per cent. Moreover, the internet's share of media budgets in France (11 per cent), Germany (9 per cent) and Italy (7 per cent) suggests considerable room for improvement.
The big question is the extent to which the internet can replace traditional media for branding in the same way as it has swallowed large chunks of direct marketing and classified ad budgets. As Group M points out, the internet will carry on creating new advertising models.