U.S., Global Ad Expansion Continues: Agencies Upgrade Outlooks

The U.S. and global ad economies are recovering faster than expected, leading two of Madison Avenue's biggest agency holding companies to significantly upgrade their outlooks for ad spending for the foreseeable future. Publicis' ZenithOptimedia Group now predicts the U.S. advertising economy will expand 2.2% during 2010, nearly twice the rate of growth that it had projected in its last quarterly tracking report, and Interpublic's Magna Global unit has upgraded its 2010 U.S. ad growth estimate to 4.1% from a previous estimate of 3.0% in April.

Excluding the effects of incremental ad stimuli from the Olympics and the political ad spending, Magna said U.S. ad spending would rise 2.8% on a "normalized" basis over 2009. Magna's previous estimate for "normalized" U.S. ad growth in 2010 was 2.1%.

Globally, Magna has upgraded its outlook for worldwide ad expansion to 5.6% from 5.0%, while ZenithOptimedia increased it to 4.8% from 3.5%.

The two agencies utilize different methodologies and bases for calculating the advertising economy, but their outlooks are moving in the same direction as advertising expenditures continue to benefit from improvements in the macro economy, which is stimulating marketers to spend more on advertising in most major media.

Noting that its most recent upgrade is the fourth consecutive upward revision in the past four quarters (and following six consecutively quarterly downward revisions during the global economic recession), ZenithOptimedia said TV and the Internet are performing best, and will increase their share of advertising budgets during 2010, while all other media will either decline or remain relatively flat.

"Television did relatively well in the downturn (because consumers tend to spend more time at home watching it when they have less disposable income) and continues to do well as the world recovers," the agency said in a report released early this morning. "New technologies, such as hard-drive recorders and high-definition channels, are encouraging viewers to watch even more television. Television tends to be much more dominant in developing markets, so their rapid rise is increasing television's share of global expenditure. We expect television to attract 41.6% of total ad expenditure in 2012, up from 39.2% in 2009 and 38.0% in 2008."

"The Internet continues its steady rise, increasing its global market share from 10.5% in 2008 to 12.8% in 2009," ZenithOptimedia continued. "By 2012 we expect it to account for 16.5% of total expenditure, just 2.5 percentage points below newspapers. Newspapers have been losing share every year since 1987, when they accounted for 40.6% of expenditure. By 2009 that share had fallen to 23.0%, and we expect it to fall further to 19.0% in 2012."

ZenithOptimedia said paid search advertising continues to be the "main engine" for the Internet's ad spending growth, accounting for nearly half (49.2%) of all online ad spending in 2009, and the agency forecast it would actually become the majority (51.4%) by 2012.

"Display's contribution to total Internet spend fell from 33.2% in 2008 to 32.6% in 2009. New formats - especially Internet video, mobile and social media - should help its share of internet spend return to 33.0% by 2012," the agency concluded.

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