Commentary

Forward Looking Ad Spending; FYI

According to ZenithOptimedia's study, "Advertising Expenditure Forecasts," global ad spending will increase 4.9% this year and grow at an annual rate between 4.6% and 5.2% over the next three years. In the U.S., ad spending will increase by 2.2% this year, and will be up by a projected 2.4% next year. Ad growth will be led by Internet advertising, which is projected to increase 12.5% next year and up an average of 10.6% a year through 2016, according to the report.

Most of the large financial, retail and automotive spenders have returned to the marketplace, notes the report, but the economy has still not returned to its pre-recession level, and neither has advertising spending.

In the U.S., the media categories seeing the highest ad spending growth this year include:

  •  Internet driven by online video and social media. (13.5%)
  • Television driven by technology (7.4%)
  • Outdoor, also technology driven (3.0%)

Categories with the largest declines this year are:

  • Newspapers (down 10.0%)
  • B2B magazines (down 6.0%)
  • Radio (down 2.6%)

Advertising Expenditure By Medium (US$ million, current prices; Currency conversion at 2009 average rates)

  

2009

2010

2011

2012

2013

Newspapers

$97,237

94,199

93,019

92,300

91,908

Magazines

43,844

43,184

42,644

42,372

42,300

Television

165,260

180,280

191,198

202,380

213,878

Radio

31,855

31,979

32,580

33,815

35,054

Cinema

2,104

2,258

2,393

2,538

2,681

Outdoor

28,120

29,319

30,945

32,821

34,554

Internet

54,209

61,884

70,518

80,672

91,516

Total 

422,629

443,102

463,297

486,898

511,890

Source: ZenithOptimedia, December 2010

The report expects the recovery in ad expenditure to continue at a steady pace over the next three years, with 4.6% growth in 2011 and 5.2% growth in both 2012 and 2013. There are certainly risks to the recovery, notably high debt in the developed world (both private and public), persistent unemployment in the US, fears of defaults in the Eurozone, and cuts in government spending. Until advertisers are fully confident that the economic recovery will be sustained, the report anticipates growth to remain below its long-term trend rate of 6%.

Advertising Expenditure By Region (Major Media: newspapers, magazines, television, radio, cinema, outdoor, internet; US$ million, current prices)

Geography

 2009

2010

2011

2012

2013

North America

156,556

160,386

164,516

169,277

175,024

Western Europe

100,143

104,225

107,520

111,300

114,712

Asia Pacific

99,746

106,021

113,345

122,000

130,711

Central & Eastern Europe

25,402

27,095

29,243

32,284

35,514

Latin America

25,711

29,315

31,673

34,082

36,836

Africa/M. East/ROW

21,220

22,654

24,150

25,941

28,044

World

428,778

449,696

470,447

494,883

520,840

Source: ZenithOptimedia, December 2010

In recent years there has been a big difference between the growth rates of developed and developing markets, and we expect this to continue, caused by the much stronger economic growth of the developing markets.

The world's current top ten ad markets divide into four broad groups. Japan is forecast to grow only 5% between 2010 and 2013, dragged down by deflation and huge public debt. The US and the big markets in Western Europe (France, Germany, Italy and the UK) are forecast to grow a disappointing 7% to 9% over the period, held back by concerns over debt, unemployment and government spending. Australia and Canada did well during the downturn, thanks partly to strong trade links with Asia Pacific, and will grow a much more substantial 15% to 17%. The ‘emerging' markets of Brazil and China will grow 31% and 51% respectively.

Its rapid growth means China will overtake Germany to become the world's third-largest ad market in 2011, and stay at that position throughout the forecast period. China is currently just over half (52%) the size of Japan, the second-largest ad market, and will be three-quarters (76%) of its size in 2013. Russia will enter the top ten in 2012, leapfrogging Australia and Canada to take ninth place, and then overtake Italy to take eighth in 2013.

Top Ten Ad Markets (US$ million, current prices; Currency conversion at 2009 average rates)

2010 Rank

 

Adspend

2013 Rank

 

Adspend

1

USA

$151,519

1

USA

$164,844

2

Japan

43,267

2

Japan

45,300

3

Germany

24,631

3

China

34,236

4

China

22,606

4

Germany

26,508

5

UK

18,047

5

UK

19,678

6

Brazil

14,243

6

Brazil

18,662

7

France

12,875

7

France

13,825

8

Italy

10,753

8

Russia

12,228

9

Australia

9,394

9

Italy

11,734

10

Canada

8,867

10

Australia

10,981

Source: ZenithOptimedia, December 2010

  

The Ten Largest Contributors To Global Adspend Growth (2013 v 2010; US$ million, current prices; Currency conversion at 2009 average rates)   

2010 Rank

 

Adspend growth

1

USA

$13,325

2

China

11,630

3

Russia

4,431

4

Brazil

4,419

5

Indonesia

2,652

6

India

2,493

7

Japan

2,033

8

Germany

1,877

9

UK

1,631

10

Australia

1,587

Source: ZenithOptimedia, December 2010

Looking at their growth between 2010 and 2013, the media can be divided into four groups, says the report:

  • Newspapers and magazines are forecast to decline by 2% between 2010 and 2013 as circulations continue to fall and readers migrate to the internet. Radio is forecast to grow by 10% - behind the market as a whole, which will grow by 16%.
  • Outdoor will outperform the markets with 18% growth, television and cinema with 19% each. These three media have benefited from technological improvements that have encouraged more consumption (such as HDTV and 3D movies) and increased their visibility and impact (such as digital outdoor displays). Meanwhile
  • The internet is still rapidly increasing its market share, which will rise from 14.0% this year to 17.9% in 2013. Display advertising's share of internet ad expenditure fell from 36.2% in 2006 to 33.6% in 2009, but the rise of internet video and social
  •  media have reversed that trend. The report forecasts display to take 33.9% of internet adspend this year, and 35.0% in 2013.

Internet Advertising By Type (US$ million, current prices Currency conversion at 2009 average rates)

  

2009

2010

2011

2012

2013

Display

$18,221

20,996

24,159

27,866

32,073

Classified

9,770

10,352

11,267

12,285

13,285

Paid search

26,219

30,535

35,092

40,520

46,158

Total

54,209

61,884

70,518

80,672

91,516

Source: ZenithOptimedia, December 2010

Television has been the stand-out success of the last five years among traditional media. Bigger and higher-quality displays, more channels delivered by digital television, and the convenience of PVRs mean people are watching more television than ever. Television's share of the ad market has increased from 37.1% in 2005 to 40.7% in 2010, and will rise to 41.8% in 2013.

Share Of Total Adspend By Medium (%)

  

2009

2010

2011

2012

2013

Newspapers

23.0%

21.3

20.1

19.0

18.0

Magazines

10.4

9.7

9.2

8.7

8.3

Television

39.1

40.7

41.3

41.6

41.8

Radio

7.5

7.2

7.0

6.9

6.8

Cinema

0.5

0.5

0.5

0.5

0.5

Outdoor

6.7

6.6

6.7

6.7

6.8

Internet

12.8

14.0

15.2

16.6

17.9

Source: ZenithOptimedia, December 2010

The importance of the internet to advertisers is understated by these figures, because as well as creating new opportunities in paid media, it has greatly expanded brands' abilities to talk to consumers via social media, both ‘owned' (on brands' own websites and microsites, YouTube channels, Twitter and Facebook accounts and so on) and ‘earned' (conversations consumers have on forums, blogs, etc). These activities can be extremely effective, and many advertisers have embraced them enthusiastically, but most of them will never be picked up in a survey of ad expenditure, says the report.

Internet Advertising By Type (US$ million, current prices Currency conversion at 2009 average rates)

  

2009

2010

2011

2012

2013

Display

18,221

20,996

24,159

27,866

32,073

Classified

9,770

10,352

11,267

12,285

13,285

Paid search

26,219

30,535

35,092

40,520

46,158

Total

54,209

61,884

70,518

80,672

91,516

Source: ZenithOptimedia, December 2010

For more information about this study and access to the PDF format file, please go here.

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