Which Country Leads Advertising Growth This Year? Which Country Has The World’s Largest Proportion of Its Advertising Spend Going On The Internet? Hint: If You Answered “US” To Either You’re Wrong!

For the first time, this year the US will not lead the world is actual dollar terms for the increase of advertising spend. That honor is expected to be China’s, which is forecast to see its total 2006 spend increase by $4.2 billion over 2005. The US is forecast to come in second at $4 billion.

Group M, part of WPP, forecasts that the 2006 global spend will end the year 5.3% higher than last year, but it cut its US growth to 2.7% from 3.6%. For 2007 it expects a 5% increase in global growth coming in at $414.08 billion, but for the US its prior 2007 growth forecast of 3.3% has already been cut to 2.4%.

It’s the UK that leads the world with the highest proportion of advertising spend going to the Internet at 13.5%, according to ZenithOptimedia. And that figure is expected to grow to 20% by 2009. The UK online spend grew a massive 40% this year and is around £1.36 billion ($2.65 billion) and is forecast to grow another 25% next year.

That growth is not coming from increased ad budgets but rather from very dramatic shifts in spending that is beginning to really cripple in particular UK national and regional newspapers that are furiously cutting their costs to the bone as advertising and circulation revenue slips away in their efforts to protect their 20% –35% margins.

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ZenithOptimedia sees 5.4% growth globally in 2007, but in the US it is predicting 4.1% -- a figure many on Wall Street said they thought was too high – Wall Street believes it won’t be more than 3%. Lauren Rich Fein of Merrill Lynch, for instance, believes US growth in 2007 will not be more than 2.9%, and globally she predicts the growth at 3.6%.

There is no denying that in the developing world, India and China in particular, that traditional media is still very much a growth business and the Internet has had little affect on the spend.

Take China, for instance. According to Nielsen Media Research, China's advertising spending for the third quarter increased 21 per cent to 101 billion Yuan ($12.9 billion) from a year earlier. Television still controls 80% of that money, but print media is recording 9% annual growth, something US and West European publishers can now only dream about

China’s economy growing at 9% annually has created a middle class that did not exist a generation ago. Billboards, print, and television all feature celebrities pushing everything from air conditioners, cars, and cosmetics to such staples as food, drink and toiletries. And don’t forget China is getting ready for the 2008 Beijing Olympic Games, and all the media hype that will involve.

But as one analyst wrote recently the Internet is the Chinese elephant standing in the room that really has not yet shown its true advertising strength. China currently generates only around $250 million annually in Internet advertising revenue compared with the $16.4 billion in the US, the $2.65 billion in the UK or $1 billion in Japan.

China is currently estimated to have around 154 million Internet users although some estimates have put the number closer to 200 million in which case China has probably overtaken the US making it number one in the world. Give these people financial credit and there is no telling what could happen, and that door is about to be opened.

Next Monday, December 11, China is lifting its ban on foreign access to its retail banking market. How long will it take for foreign banks to get established and start issuing their credit cards in the millions? E-commerce is very immature in China, primarily because there are not that many credit cards around -- the card of choice so far is the debit card but that restricts the user to what’s sitting in the bank.

But with all that credit the foreign banks are expected to make available then e-commerce Internet sites will absolutely take-off, as will advertising on those sites. And that doesn’t even taken into account the additional advertising in all media to entice people to buy more on credit.

It’s no surprise, therefore, that China Mobile, the country’s largest telecom, set its 52-week NYSE high in November. The government has budgeted $127 billion over the next five years to improve Telco development and mobile facilities are being upgraded in readiness for the 2008 Beijing Olympic Games.

Focus Media, the largest LCD display operator in China, targeting out-of-home advertising in offices, stores and residential buildings, hit a new record on NASDAQ at the end of November when it reported third-quarter profit jumped fourfold as advertisers boosted their spending on the company's various platforms.

Foreign Investment money seems almost to be running into China and although the government has tried to apply the brakes it has had little impact. All the signs are that as people get more spending power the more advertising will grow.

The Chinese are quite convinced that in about four years time their Internet usage will have grown to such an extent that Chinese will challenge English as the premier language on the web.

Which Country Leads Advertising Growth This Year? Which Country Has The World’s Largest Proportion of Its Advertising Spend Going On The Internet? Hint: If You Answered “US” To Either You’re Wrong!

When it comes to advertising growth the world is leaving the US behind. Many forecasters have cut their US year-end expectations to somewhere between 2 – 3%, but for the world as a whole advertising growth is predicted at around 5%.