GroupM has issued its annual outlook for the global growth of media: “This Year Next Year: Worldwide Media and Marketing Forecasts.” The summer 2010 edition covers over 55 countries and was compiled using GroupM’s resources in advertising, PR, market research and specialist communications. The report says their global headline has steadily gathered pace, but remains below normal. A year ago they predicted global ad investment would shrink 1.5% in 2010. Six months ago they raised this to 1%. Now they are at 3.6%, which if achieved would return us to a global total of $453 billion, or somewhere between 2006 and 2007 – or 2004 and 2005 if you account for consumer-price inflation.
Measured media investment in the older industrialized world fell about 11% from peak to trough. They think it will take two years to grow back the dollars lost in the last two. Western recovery is protracted for three main reasons. The ad business is migrating to the new world at just over a share point every year. Online is similarly taking an extra percent every year out of ad budgets because of the better value than the old media it replaces. “Online value continually improves: advancing digital techniques is our top priority, and attracts more investment from larger advertisers. The third main reason is the bills coming in for big government, bank bail-outs and economic stimulus: advertisers are as aware of anyone of the risk of double-dip recession,” GroupM explained in its summary.
There is another more subtle reason for sluggishness in measured investment, namely that less is being measured. Digital media analysis and content creation are examples of so-called ‘soft’ services clients demand, but which do not show up anywhere public. These services typically occupy a single-digit percentage of client marketing investment today, but are trending to 10% within three years and are already much higher than this in certain direct marketing categories.
Parts of Western Europe experienced something of an ad bounce in the first half of the year. A plausible explanation is advertisers taking advantage of depressed media pricing to address brand health decay caused by recession – sometimes using late and unexpected funding released only after the tight budgeting round of late-2009. They knew weak YOY comps stood to flatter any growth, but it still created a few surprises. In some European TV markets, a modest rise in demand met supply already sold at deep discounts, which is a recipe for sudden price inflation and disruption. This has not however created price inflation in the other media: on the contrary, media vendors remain ready to negotiate. Such growth as they have seen has not depended on particular product categories, but has been quite generalized, with FMCG and telecoms frequently among the front runners.
US ad investment is bound by flat-to-down consumer spending, as evidenced by results from companies across the retail, travel fast-food and durables sectors, said the report. Online investment continues to grow, led by paid search, but TV supply exceeds demand. The trade press fixates on upfront froth, but this signifies only that confidence may improve into the new broadcast year, and that advertisers are hedging against the contingency of a firmer scatter market. It does not signify a commitment to raised advertiser investment. At the category level, all that can be said is CPG exhibits staying power, and auto is giving local investment a modest lift from a low base.
A healthy ad recovery cycle would show advertising and marketing investment tracking ahead of GDP, but this first prediction for 2011, though positive, lacks momentum in the developed world and has measured media continuing
to lose share of the wider economy. Our longer-range model based on IMF economic forecasts for the period 2012-2015 does however offer some hope.
This is scenario planning, not detailed analysis, but tells GroupM it is possible a
slow recovery now could translate into a release of deferred advertiser demand from 2012. This same model does however predict something of a permafrost in Japan, while strongly indicating the USA has the potential to assume its traditional role of leading western recovery.
Central and eastern Europe ad growth has picked up more markedly in 2010, but this depends almost entirely on Russia and Turkey, which together account for more than half the region’s ad investment. These are both TV-driven
markets, Russia’s taking share from a print sector in pricing disarray, and Turkey’s facing a substantial government restriction of TV ad inventory.
China remains the world’s biggest contributor to ad growth in 2010, accounting for more than one in three of all net new ad dollars they expect this year, and one in four as the rest of the world catches up in 2011. Indonesia and India
are the next biggest contributors from Asia. GroupM’s grouping of ‘new world’ countries accounts for 34% of the global economy this year and 30% of measured media investment. As mentioned above, they see advertising shifting at a steady one-point-plus every year, and the same for its share of global GDP.
Global media recession came to 6.5% in 2009, but without internet this would have been 8.6%. Internet has had nothing like a recession except in a handful of highly-stressed markets, adding 10% to its measured total in 2009.
Many countries cite search and social media as particular drivers, but what continues to power the medium in large mature markets is the steady advance in creativity, analysis and technology which embeds digital in almost all marketing activity. Measured internet added two points of global ad share in each of 2007, 2008 and 2009 and they think will sustain a rate of one point a year this year and next, to reach 16% in 2011. The new world is below this average, so presents an outstanding opportunity for growth. In the West, rates approaching 20% are already within reach of many countries.
Foremost among the larger traditional media is TV. As out-of-home and cinema have done, the medium has made digital an asset rather than a liability. Its traditional advantages remain its ability to propagate brand awareness and memorable advertising at speed, at scale, and reasonable cost, which modern digital and econometric techniques regularly confirm. It is the workhorse of the new world, and a good fit in the more integrated marketing communications in the old.
They forecast other marketing services will advance 4.5% in 2010, fractionally faster than media advertising at 3.6% but still not quite replacing 2009’s lost business. The direct and specialist category is leading this with its growing
digital components. Market research and PR report improvement in discretionary client investment but this is hedged by a lack of client confidence which manifests itself in a bias to shorter assignments over long-term projects and slow decision-making.