ZenithOptimedia now predicts 3.5% global ad growth in 2010

ZenithOptimedia released its global ad forecast which shows the market is continuing to strengthen — from up from 2.2% at the beginning of April to 3.5% now. This is the third upgrade in a row, after six consecutive downgrades. Most of the upgrade is in North America and Western Europe, where ad spend was stronger than expected in the first half of the year, but these regions are still growing much more slowly than most developing markets.

Overall they forecast 1.3% growth from developed markets (North America, Western Europe and Japan) in 2010, compared to 8.6% growth from developing markets (everywhere else). The gap will narrow slightly in 2011, but growth in developed markets will remain modest: ZO forecasts developed markets to grow by 2.4% in 2011 and 2.9% in 2012, while developing markets grow by 9.1% and 9.8% respectively. They expect developing markets to drive most of the growth in global ad expenditure over the next few years, contributing $39 billion of the extra $60 billion they expect to see added to the world ad market between 2009 and 2012.

A strong downturn in global ad expenditure has historically been followed by a sharp rebound three years later. In 1994, three years after the 1991 recession, ad expenditure grew by 6.8% and in 2004 (three years after 2001) it grew by 7.4%. These spikes in growth were ahead of the average growth rate of the ad market, which has been 6.1% a year for the last 25 years. ZO currently forecasts a similar year of healthy growth in 2012, the third year after the 2009 downturn, but at 5.3% it is below the trend rate of growth. This reflects the severity of the latest downturn, which will prolong the time it takes advertisers to regain confidence in their growth prospects, particularly in developed markets.

North America is the region they’ve upgraded the most – by 2.8 percentage points. In their last forecast they expected it to shrink 1.5% this year, but ZO now forecasts 1.3% growth. This is because consumer confidence and spending has recovered quite strongly in the US, despite persistent unemployment. Network TV had a very healthy Q1 in the US, benefiting from an unusually strong post-season football line-up in January (Super Bowl XLIV was the most-watched program ever, drawing 106.5 million viewers) and the Vancouver Winter Olympics in February. This strong start was followed by 6%-10% rate increases for the 2010/2011 network upfront. Strength in television has been balanced by continued, though slower, decline in newspapers, magazines and spot radio, but they still expect 1.1% growth in US ad expenditure this year. Canada has bounced back from the recession much more quickly, and they expect it to grow 5.4% this year.

They’ve upgraded most of their forecasts for Western Europe, despite concerns over Eurozone debt, after advertisers demonstrated willingness to spend in the first half of the year. They now predict 2.2% growth in 2010, up from 0.4%. The only market they have not upgraded is Spain, one of the most vulnerable euro markets, which they have downgraded from +0.4% growth to -0.7%. ZO currently forecasts growth in the region to build up gradually in 2011 and 2012, to 2.6% and 3.4% respectively, though they will keep a close eye on demand as government austerity measures kick in later this year.

Japan – which they forecast to shrink by 0.7% this year – is almost completely decoupled from the rest of Asia Pacific, where they expect 10.6% growth this year, including double-digit growth rates from seven markets (China, India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam). In most of the region the recession is now something of a distant memory, and advertising is growing as quickly as it was before the downturn. (Between 2001 and 2008 ad expenditure grew by 10.1% a year in Asia Pacific, excluding Japan.) Over the next few years they expect slow improvement in Japan together with continued impressive growth from the rest of the region, generating 5.8% growth for the region as a whole in 2010, followed by 6.5% in 2011 and 7.5% in 2012.

A few of the smaller markets in Latin America are facing a year of slow growth in 2010: they forecast Chile, Costa Rica, Puerto Rico and Uruguay to grow by 1%-2% each. But most markets have fully recovered and are enjoying a year of healthy expansion. they forecast 7.0% growth for the region as a whole in 2010, and very strong growth of 11%-14% from Mexico, Panama, Peru and Venezuela. they expect Latin America to maintain 7.0% growth in 2011, strengthening to 8.5% in 2012.

Central & Eastern Europe suffered more from the downturn than any other region, losing 24.6% of ad expenditure in 2009. The region is now split between those markets that quickly recovered and are now making up lost ground (notably Belarus, Bosnia and Herzegovina, Russia, Serbia, Slovenia, Turkey and Ukraine, which they forecast to grow by between 11% and 26% this year), and those where entrenched economic problems are still dragging down ad expenditure (Bulgaria, Estonia, Greece, Hungary and Latvia, which they expect to shrink by between 3% and 16%). they predict that Greece – suffering from debt crisis and austerity – faces the most prolonged decline, with a 13.9% drop in ad expenditure in 2010, followed by a 7.0% drop in 2011 and a 0.3% drop in 2012. they expect all other markets to return to growth in 2011, however, and forecast steady improvement in ad expenditure for the region as a whole, from 7.0% growth in 2010 to 9.8% in 2011 and 10.9% in 2012.

Advertising expenditure by region
Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)
US$ million, current prices. Currency conversion at 2009 average rates.

Source: ZenithOptimedia

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)
Year-on-year change (%)

Global advertising expenditure by medium
Television did relatively well in the downturn (because consumers tend to spend more time at home watching it when they have less disposable income) and continues to do well as the world recovers. New technologies, such as hard-drive recorders and high-definition channels, are encouraging viewers to watch even more television. Television tends to be much more dominant in developing markets, so their rapid rise is increasing television’s share of global expenditure. they expect television to attract 40.8% of total ad expenditure in 2012, up from 39.2% in 2009 and 38.0% in 2008.

The internet continues its steady rise, increasing its global market share from 10.5% in 2008 to 12.7% in 2009. By 2012 they expect it to account for 17.0% of total expenditure, just two percentage points below newspapers. Newspapers have been losing share every year since 1987, when they accounted for 40.6% of expenditure. By 2009 that share had fallen to 23.0%, and they expect it to fall further to 19.2% in 2012.

Paid search is the main engine of internet growth: it accounted for 50.2% of all internet expenditure in 2009, and they forecast this proportion to rise to 52.6% in 2012. Display’s contribution to total internet spend fell from 32.9% in 2008 to 31.9% in 2009. New formats – especially internet video, mobile and social media – should help display stabilize in 2010 and increase its share of internet spend to 32.0% in 2012.

In the US, where they are most visible and best measured, mobile advertising and social media are growing much faster than any other internet format. Between 2009 and 2012, ZO forecasts mobile advertising to grow by an average of 43.2% a year, while social media advertising grows by 30.2% a year, compared to 15.6% a year for the internet as a whole. The two formats overlap to an extent, since many consumers use their mobile devices to access their social profiles, and mobile social networking will become more and more important to advertisers over the coming years. Mobile and social advertising accounted for just 5% of internet expenditure in the US in 2009, but they expect this proportion to rise to 8% in 2012.

Advertising expenditure by medium
US$ million, current prices Currency conversion at 2009 average rates.

Source: ZenithOptimedia
* The totals here are lower than the totals in the ‘Advertising expenditure by region’ table above, since that table includes total adspend figures for a few countries for which spend is not itemised by medium.

Share of total adspend by medium (%)

Internet advertising by type
US$ million, current prices Currency conversion at 2009 average rates.

Source: ZenithOptimedia