What a Long, Slow U.S. Ad Trip it's been...

Forecast: Long, Slow U.S. Ad Recovery

ZenithOptimedia predicts 'disappointing' ad growth between 2010-13

Adweek: Dec 5, 2010

For the U.S. ad economy, it’s going to be a long, slow climb to full recovery, according to a new forecast that Publicis Groupe’s ZenithOptimedia will present at the UBS
Media conference in New York on Monday (Dec. 6).

Two other shops will also offer new global ad forecasts at the conference: Interpublic’s MagnaGlobal and WPP’s GroupM. Headlines from Magna: China will soon overtake Japan to become the second-largest ad market, while the Internet will surpass newspapers within two years to become the second-largest ad medium after TV. GroupM predicts that global ad spending will reach $500 billion for the first time next year, up 6 percent.

According to the ZO forecast, ad spending in the U.S. will grow just 2.5 percent next year to $155 billion, and a total of just under 9 percent between 2010 and 2013 to $164.8 billion, an increase that the agency termed “disappointing.” The Olympic-Election year of 2012 will see growth of just 3 percent to $159.6 billion.

Meanwhile, the global outlook is a little better, with projected spending for the same period up about 5 percent annually to $521 billion, per ZO.

“It’s a muted recovery,” said Steve King, ZO’s global CEO. “While the recovery is underway, it’s just not as dramatic”—or as rapid, compared to the recoveries that followed other recent recessions, he said. The severity of last year’s economic downturn partly explains the slow rebound, said King. It was also more widespread in terms of its geographic reach.

Of course, the sluggish growth projected for the next few years in the U.S. is better than the performance of the recent past. In 2009, spending dropped 7 percent. And 2010 growth is expected to total an anemic 1.5 percent to $151.5 billion, per ZO.

Factors stunting near-term growth in the U.S., ZO said, include corporate concerns about debt, unemployment and government spending.

That said, some growth is better than none, and GroupM chief investment officer Rino Scanzoni noted a “significant rebound in spending” in the U.S. during the second half of this year, compared with the depressed spending levels during 2009. Most of that growth was fueled by TV and Internet spending, he said.

ZO predicted that near-term worldwide spending growth will be driven by emerging markets. Brazil for example, is projected to grow 31 percent next year.

According to MagnaGlobal, China and India will show “standout” growth over the next several years. China will overtake Japan to become the world’s second-largest advertising market by 2013, Magna predicts, with ad revenues exceeding $54 billion. India’s ad economy should rise 21 percent next year to over $5 billion, with annual growth averaging more than 19 percent over five years.

“Until advertisers are fully confident that the economic recovery will be sustained, we expect growth to remain below its long-term trend rate of 6 percent,” said King of ZO.

Globally, ZO said that newspapers and magazines will continue to be the biggest media laggards, with spending in those sectors down another 2 percent between 2010 and 2013 as circulations continue to fall and readers migrate to the Internet. By contrast, Internet ad growth will spurt 48 percent during the same period. TV spending will be up 19 percent and radio will be up 10 percent.

According to Magna, Internet advertising will overtake newspapers as the second largest ad medium globally by 2013. It said that annual Internet ad revenue growth would top 7.5 percent over the next five years to $117 billion.