Ad Agencies Forecast Big 2011 Global Growth But Read The Small Print – It’s Not So Great For the 'Mature' World And Print Remains In The Doldrums

Philip Stone December 8, 2010 Follow on Twitter

The forecasts that came from the annual UBS Media conference in New York brought big smiles – global ad spending next year will be up, the TV spend will be up, the Internet continues it merry way, but when it comes to print that kind of got buried. After all, who likes bad news when you’re trying to promote the good?

And the bad news was that depending on which forecast you believe, sometime in 2012 or 2013 Internet ad revenues are going to overtake print. And it will be because Internet sales continue soaring while print will probably still be in decline, breakeven if lucky.  Group M says it expects global Internet ad spending to exceed the newspaper spend some time in 2012 as does Magna.  ZenithOptimedia says that while Internet ad growth will soar some 42% into 2013 newspapers and magazines will see a fall of around 2%.

In other words while some print here and there – especially in emerging markets -- may start showing better figures, overall things still look very glum. The switch of spend to digital will continue into the foreseeable future and that means print  will have to reinforce its new model of not spending a penny it doesn’t have to while doing everything possible to increase digital revenues.

A look at the most recent US newspaper figures tell the story. In the third quarter, according to the Newspaper Association of America (NAA), newspapers earned $5.4 billion in print ads – down 7.1% from a year ago -- but newspapers earned $689 million from online, up 10.7%.  So, that sounds like the new business model is on track, but the reality is that while the online growth is encouraging it is coming in much too slow. Add the figures and what you really see is that print still accounts for 89% of newspaper revenue and online just 11%, and for the business model to really work that needs to be a 50-50 split – and that doesn’t mean just transferring print revenues to online but rather online needs to grow a whole lot faster with new revenue not at the expense of print. And while there were some big ad spend increases in the US this year as recessions blues abated, print saw little of that added spend that went mostly to TV, radio and the Web.

The headline numbers forecasting big global growth show that emerging markets will be the big stars -- particularly China  with a 51% growth over two years forecast by ZenithOptimedia meaning  it will overtake Germany as the world’s third largest market (behind the US and Japan) by 2013.  Indeed, the more mature markets of North America and Western Europe are looking only at single digit percentage growth whereas Asia Pacific region growth is forecast up by some 23%. Magna, for instance trumpets a 5.4% global ad growth next year, but again a closer look shows it expects such countries as Argentina, India and China to be in the forefront.

ZenithOptimedia says growth in the US and western Europe is being held back by economic uncertainty – growing debt, unemployment, and government spending. All of that, of course, affects consumer confidence and consequently consumer spending.

The problem for print is that the digital world keeps growing its advertising possibilities  but most of that new spend will not be new by the advertiser; rather it will be redirected from elsewhere and in most cases that means from print. For instance, MagnaGlobal expects online video to be a major growth area with some $4.7 billion in global ad revenue and growing at near 20% for each of the next six years. At the same time mobile ad spending is forecast to grow to $6.6 billion by 2016. The big question that must keep publishers awake at night is just how much of that will come from their coffers. It does not look rosy for print where the most positive thing the NAA president could say recently was that the print revenue percentage declines are continuing to slow, but, yes, they are still declining.

TV is expected to grow its number one spot in the global ad world – a bit more than 40% of the overall take – and it is being aided by new technology such as HD and 3D TV that keep viewers glued to their screens. But what new can print offer that keeps readers glued to paper? Digital platforms, whether the Internet or tablets, mean that the overall news product can be improved with video and the like to draw in readers who may have deserted paper, but what is there that can draw readers back to paper?  Convenience and digital convergence still look like the only answers.

The general feeling is that the pre-recession spend of 2008 still won’t be seen again for another couple of years but when that full recovery does come the likelihood is that print (paper) won’t see much of it, if any. Just how much growth can be attracted to print’s digital offerings may well decide the day, but if it doesn’t comes as quickly as it needs to then A4 (American letter) as the most popular print page size may not be that far away.

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