MAGNAGLOBAL released an updated forecast for advertising around the world, forecasting that media suppliers around the world will grow their ad revenues this year by +4.2% to total $377 billion on a constant currency basis, above their previously published expectations of +2.4%. This follows 2009’s downturn which caused a contraction of 11.3% compared to 2008’s totals. North American advertising is expected to hit $58.7 billion in 2010, up 9.4%.
Long term growth rates are also upgraded modestly, reflecting stronger expectations of global economic recovery through 2015. Their compounded annual growth rate for the global industry is +5.1% over the next five years, compared to expectations of +4.8% they forecast late in 2009.
Video retains its dominance around the world, with more than 40% of advertising, a total of $151 billion, relying on traditional TV. Notably TV’s share is lower in Europe given the pronounced role of public service broadcasters (restrictions on PSBs’ advertising efforts limit TV inventory), but in all regions television is growing, up 5.4% on average through 2015. Concurrently, online advertising should overtake newspapers as the second-largest advertising medium by 2013, and total $103 billion in 2015. This will occur largely due to market expansion as new advertisers have become the backbone of that medium.
But newspapers will continue to grow modestly – up 1.8% in constant currency terms over the next five years – despite sustained declines in many markets. In many countries, newspapers represent a viable means of distributing content to emerging consumer classes and do not face meaningful cannibalization from online competition.
Magazines face worse conditions with respect to online competition (especially with news and celebrity content), and should fall by 0.3% each year through 2015.
Radio and Out-of-Home will grow on a global basis, although Out-of-Home faces more favorable circumstances.
For radio worldwide, Magnaglobal sees 2.1% growth in 2010, to $27.5 billion. For radio in North America, Magnaglobal estimates 1.2% growth this year, to $15.7 billion.
Unsurprisingly, two countries continue to stand out for their absolute size and relative growth, India and China. India’s advertising economy should rise by 10.4% in local currency terms during 2010, to generate R200.5 billion (more than 4 billion in US dollars). Over the next five years they expect growth rates of 14.8% on average in local currency terms, and paired with currency appreciation India’s advertising economy should be generating 11.3 billion in US dollar revenues in 2015.
China should be even more robust, with ad revenues up 16.4% on average over the next five years. China will become the second largest market globally by 2012, and suppliers should generate 308 billion Yuan in ad revenues by 2015. At constant currency exchange rates, this would be worth $45.2 billion. But assuming China’s currency peg is removed in years ahead, China could be generating $65.1 billion in ad revenue during 2015.
Accounting for actual and expected changes in currencies from year to year – important from the perspective of a media owner or advertiser who does not hedge currency exposures – they also view the world in dynamic currency terms. Broadly, their dynamic currency estimates assume weak US and Euro currencies against most other currencies. On this basis, in US dollar terms global advertising will rise by +5.1% during 2010, and continue to grow by a CAGR of +6.6% through 2015.
In dynamic Euro terms, changes are even more pronounced. With extreme weakness in the Euro currency over the past six months and prospects for austerity in much of the region, activity abroad produces positive results when translated into Euros. During 2010, global advertising should grow by +13.2% in Euro terms, and by an average of 6.7% over the following five years. But within its domestic market, expectations are reduced over the next few years as the region comes to grips with long-term structural challenges to many of its
economies. Portugal, Greece are among the slowest-growing ad markets globally, and many countries in the region will lag the rest of the world for the foreseeable future.