Carat predicts global ad spend down 9.8%

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Carat has issued new global ad spend growth forecasts for 2009 & 2010. The 2009 market decline was worse than previously forecast, but there is a return to modest growth in 2010. Only online expected to show growth this year; reaching 10.0% of global ad spend. Carat’s revised prediction for this year is a fall of 9.8%.  The revision of 4 percentage points (from -5.8% in March) is due to significant reduction of forecasts in all regions, with the exception of Asia Pacific.


RBR-TVBR spoke with Carat USA President Martin Cass: “When we were looking in the first two months of the year to try and make a judgment going out, I think most didn’t expect to see this kind of a dent this year. When we were talking 9.8% in the US for 2009 early on, we only had two months of information. It was significantly deeper than our first expectations led us to believe…But I think this year is done, isn’t it? It’s dead and gone, frankly. Not much is going to change in the last three months from an ad agency point of view. I think it’s more interesting to look at next year—and that’s the flattening out you’re beginning to see. By the second half of next year, we envision that things will be picking back up again.”

What about next year?
“If you look at some of these figures, China for example, China and Asia, certainly, are still on an uptick in general,” Cass told us. “So whilst the ‘old economies’ are relatively weak even going into next year, they’re flattening. If you start to look at APAC [Asia-Pacific], you start to see growth of about 4%, and that’s really driven by China. The developing markets certainly seem to be turning out of this quicker than the established ones.”

He adds, “How long it will be before China overtakes the US in terms of the biggest ad spending market in the world I don’t know, but they’re certainly hard-charging in that direction.”

So although global spend for 2009 has been cut back considerably, predictions remain for a slight return to growth in 2010, at 1.0% globally, driven by much more stable conditions in the West and recovery in developing markets, particularly China.

 

Year on year % growth at current prices

 

2008a

2009e

2010e

GLOBAL

1.0 (1.0)

-9.8 (-5.8)

1.0 (0.7)

USA

-1.8 (-1.8)

-16.3 (-9.8)

-2.6 (-2.7)

CANADA

-7.0 (2.0)

-2.7 (-2.5)

1.7 (0.7)

WESTERN EUROPE

-2.6 (-2.9)

-11.0 (-6.6)

-0.3 (0.1)

UK

-3.2 (-5.5)

-11.7 (-7.1)

1.4 (2.0)

GERMANY

-2.0 (0.0)

-7.0 (-2.2)

-2.3 (-1.1)

FRANCE

-2.6 (-2.6)

-7.1 (-5.0)

1.0 (0.5)

ITALY

-1.9 (-1.9)

-12.4 (-6.5)

-1.0 (0.6)

SPAIN

-13.1 (-12.7)

-19.0 (-16.5)

-2.0 (-4.0)

NORDICS

1.9 (-0.2)

-19.2 (-5.6)

-1.1 (-2.7)

CENTRAL & EASTERN EUROPE

12.3 (12.2)

-18.4 (-8.2)

3.3 (-1.0)

RUSSIA

16.6 (16.6)

-21.9 (-8.6)

1.5 (-1.5)

ASIA PACIFIC

5.4 (5.0)

-0.3 (-0.8)

4.6 (4.3)

JAPAN

-4.2 (-4.2)

-5.5 (-5.5)

0.0 (0.0)

CHINA

18.9 (18.9)

6.9 (4.6)

9.0 (7.2)

AUSTRALIA

3.7 (4.2)

-6.5 (-1.9)

0.0 (1.8)

 

Figures in brackets show their previous forecasts from Mar 2009

Changes in major ad market forecasts
Of the world’s largest advertising markets, the most notable revisions occurred in the US, Russia, Italy, Germany and the UK.  Lesser downward revisions can be seen in Spain, France and Canada. 

In the US, ad spend in the first half of the year was well below that in 2008.  Previously committed activity was scaled back while significant incremental spending has not materialized.  The current full year projection for 2009 is -16.3% (March 2009 forecast of -9.8%) with significant recovery now not expected until the second half of 2010 at the earliest. All major media categories are tracking below last year. 

National television and radio have been holding up better, due to their ability to drive strong reach and awareness. Newspapers continue to be hard hit by both the weak economy and consumers spending more time online.  The real estate and automotive categories have cut back sharply and classified advertising is weak.  Digital losses have been softened by some traditional media spend shifting over and the continued strength of search advertising.  Online video has also experienced growth; however online display has been much more negotiable in terms of price.

In the UK, their latest estimates for the total market are predicting a reduction of -11.7% (March 2009 forecast of -7.1%), with hopes of a Q4 market recovery now unlikely. With the exception of internet and cinema, all other media are forecast to suffer a double digit decline year on year.  TV (-11.9%), Radio (-12.6%), Outdoor (-12.2%) have all been hit by roughly the same decline.  Newspapers and magazines have been hit the hardest, -20.3% and -16.3% respectively, although some of their decline is likely to be structural. Modest growth is forecast for 2010, with the World Cup expected to benefit the market, however a recovery is not forecast to be properly underway until 2011.

In Italy, spend is expected to decrease by -12.4% (March 2009 forecast of -6.5%) this year, almost twice the pace of decline of their previous estimate. The forecast for 2010 is for a smaller negative drop of -1.0%, with a possible recovery in 2011 of +1.9%.  The print market has been hit badly, with newspapers down 20.4% and magazines down 24%.  TV reaffirmed its leadership and although it is also experiencing a decrease in spend for 2009 (-10.2%), its losses will be lower than the market average.

In Russia, market volumes are now expected to decrease by 21.9% (March 2009 forecast of -8.6%). Print and radio ad spends are expected to show the most significant declines, followed by OOH.  TV and the internet are expected to be more stable.

In Germany, advertising expenditure is forecast to decrease by -7.0% (March 2009 forecast of -2.2%) this year, with declines in the 1H of the year not seen since 2002.  Cinema saw the strongest declines, followed by consumer magazines.  Newspapers have revised down forecasts however in comparison to other media and bucking the global trend the losses have been limited.  Newspapers and radio are seen as important support to sales performance in Germany and both offer the flexibility of shorter planning times.

The gloomy outlook in the US and Western Europe is not repeated in Asia Pacific and Latin America, where revisions since March have been less severe. In China, their forecast for 2009 has been revised upwards from 4.6% to 6.9%, but even here advertisers are proceeding with caution and adjusting spend on a quarterly basis. The only region forecasting positive growth this year is Latin America (0.5%).

The outlook for the smaller markets of Central and Eastern Europe has deteriorated from a forecast decline of 8.2% to 18.4%; and in the Nordics from -5.6% to -19.2%. 
 

Sector Breakdown

 

Global year on year % growth at current prices

 

2008

2009

2010

Television

4.9 (5.1)

-6.3 (-3.7)

2.2 (1.9)

Newspapers

-5.9 (-5.2)

-16.7 (-12.0)

-2.7 (-3.0)

Magazines

-5.1 (-5.4)

-17.1 (-8.6)

-3.3 (-2.8)

Radio

-3.5 (-3.5)

-12.4 (-10.2)

-0.2 (-0.9)

Cinema

4.9 (4.7)

-3.2 (0.0)

1.7 (2.7)

Outdoor

0.7 (0.5)

-6.7 (-4.2)

2.4 (1.8)

Online*

16.4 (14.7)

1.0 (6.3)

8.3 (8.0)

 

Figures in brackets show their previous forecasts from Mar 2009

* throughout these forecasts, online advertising is defined as online display and paid search

Online advertising remains the only area of the media that will see growth this year, estimated at 1.0% globally.  Online growth remains in double digits in the markets of Asia-Pacific and Central and Eastern Europe this year.  However, low single digit growth in Western Europe and a decline in the US have led to a downward revision in forecasts.  Online growth should continue to make significant progress in 2010.  Of the sectors, Television and Cinema continue to hold up best, reflecting the relative popularity of cinema and home entertainment in the downturn.