Look Beyond 2010 For Global Ad Growth

Philip Stone December 9, 2009 Follow on Twitter

Every December the major global advertising giants prognosticate on how great things are going to be the following year, and then usually come April they reduce their forecasts a bit, come July by quite a bit more and come October we more or less know the true picture which is substantially less revenue less than had been forecast that past December. Well, at this year’s New York UBS Media Week they forecast a 1% gain for 2010, so if recent past experiences are anything to go by, 2010 is going to be another rotten advertising year.

ZenithOptimedia (Publicis) says this year global ad spending will fall 10.2%, but next year it says it will increase by 0.9%.  Group M (WPP) is looking for a 6.6% drop in 2009 spending but for a 0.8% increase for 2010.

The US still remains a disaster – ZenithOptimedia says the 2009 spend will drop by 12.9% and 2010 will drop by 2.6%. Group M has the US falling by 8% this year and by 4.3% in 2010. Western Europe is really not doing much better with ZenithOptimedia, for instance, expecting the Western European spend to be down 11.8% this year and 0.5% next year.

So if the US and Western Europe are going to remain bleak zones then where does the added spend come from? Group M says that Brazil, Russia, India, Indonesia and China – the so-called BRIIC nations -- will lead the way.

And both agencies seem convinced that traditional media will continue to see weaker sales for some time to come as spend is diverted to digital. ZenithOptimedia says that within the next five years or so Internet ad revenues – based primarily on search -- will overtake newspaper ad revenue.

The agencies seem to be depending on financial services and the auto sectors in particular to do better after a particularly difficult 2009.  The auto sector is crucial – it is the single largest US advertising category and automakers and their dealers cut their spend in the first nine months of the year by 30.8% over last year  -- that is a reduction of $3.3 billion – yes billion, according to TNS Media Intelligence (TNS MI). You don’t think the media is missing real bad that $3 billion?

The ad agencies are also wary because they recognize that advertisers like never before are looking for value for money, they are still in cost-saving mode, and media rate cards are no doubt going to continue to spring plenty of leaks.

The TNS MI figures show that overall the US media spend this year is really hurting  - a 15.23% decline in Q3 – and early results from Q4 show no improvement, meaning the US will most likely end the year with seven continuous quarters of year-on-year spend declines with newspapers and radio each down 22.8% through Q3.

And when it comes to US newspapers you know it’s bad when publishers are bragging that they are forecasting a far better Q4 than preceding quarters with declines of “only” around 25%.

The New York Times, for instance, says it expects print ad revenue to decline 25% in Q4 which is an improvement over the 30% drop for Q3 but it still spells trouble. The newspaper has been looking for 100 newsroom buyouts, it got about 50, and the sword is expected to drop on another 50 very soon.

Same revenue story over at McClatchy that experienced a 30% ad revenue drop in Q2 and a 28% drop in Q3 so the forecast that it will do better than the Q3 declines seems to set a trend, but we’re still talking about a huge drop of around 25% all the same.

So with ad dollars not that easy to come by it seems to make great sense that as part of the Comcast-NBCU deal in which Comcast takes control of the General Electric terrestrial and cable networks that GE is obliged to spend at least $59 million a year for a five year period starting the year after the deal closes and GE must buy at least $50 million advertising on the various NBCU networks during the London 2012 Olympic Games.

It seems that what looked like a lot of “house ads” on the NBCU stations over the years were really big money – during the first nine months of this year GE spent $146 million in advertising on its NBCU networks, and that figure was down 16.6% from the year before, according to TNS MI. Around 60% of that advertising came from Universal Studios pushing movies, DVDs and the like.

So, all in all, not really a very healthy prognosis for 2010. Maybe an improvement; most likely not. The most accepted view is nothing meaningful is really going to happen until 2011, but traditional media will continue to suffer for far longer than that.

See also...

Advertising – The Slump and the Shift

Media and advertising are learning new steps. First the slump, then the Shift. ftm watches the dance for the stumbles and the surprises. 60 pages PDF (June 2009)

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