• by Joe Mandese  @mp_joemandese, August 14, 2007

Despite erratic global marketplace conditions, ad spending has kept pace with worldwide economic growth, though the stimulus is coming from markets outside the U.S., according to the most recent installment of GroupM's periodic "This Year, Next Year" advertising and marketing expenditures tracking study. In the short run, the Internet is playing a bigger role in driving worldwide and U.S. advertising growth than GroupM economist Adam Smith thought in his last prediction, though the Internet's stimulus is expected to begin to flatten next year, as TV remains the biggest influence in the advertising marketplace.

"Among the traditional media, TV remains far and away the main engine of advertising growth in the 20% of the 'developing' global advertising economy. We see its headline growth contribution has slipped a point or two in 2006 and 2007 since our last forecast. This is the result of internet upgrades," writes GroupM's Smith in the new report. "TV comes back with a mini-bounce in 2008 with the well-known stimuli of the US presidential elections (a possible billion-dollar race this time); the Olympics (another potential billion on USA TV alone, so one could begin guessing the global uplift at double that, and triple to include other media)."

Overall, television is expected to account for 47% of worldwide and 36% of U.S. ad spending growth this year, vs. 30% and 50% respectively for the Internet.

Smith originally predicted the Internet would contribute only 27% of the world's ad spending growth in 2006, but said it revised this upward by five percentage points as a result of stronger than expected actual spending this year.

"We are well used to having to hitch the Web up retrospectively, and well aware of the temptation to believe that this year must be the peak of its acceleration," Smith explained. "We will be right eventually. The topography of these numbers actually suggests the rate of measured U.S. Internet growth peaked in 2004-05 and in Western Europe in 2005-06. But make no mistake, the Internet is still the biggest advertising driver in the developed world, where it is attaining or approaching double-digit shares of measured media investment. We emphasize 'measured' because a lot to do with the Internet goes missing in action. Respected industry survey samples are just samples: there are a lot more internet media owners than there are press barons. No one anywhere measures what advertisers spend either on creating online content, or analyzing the torrent of data."

Despite these gains, GroupM expects the rate of the Internet's contribution to overall ad spending to moderate in 2008, an Olympics charged year in which TV will once again emerge as the biggest ad market stimulus, accounting for 52% of worldwide and 48% of North American ad spending growth next year.

"Internet growth cannot last for ever or it would account for the entire global economy in about 65 years at its current rate of growth," Smith noted. "What will slow it down? At the end of 2005, 35% of western European homes had broadband internet access. By the end of 2006 this was 46%. Broadband speeds will increase until bandwidth is effectively infinite, but once a user has broadband the main constraint becomes time spent online."

Source: GroupM's "This Year, Next Year" advertising tracking study, August 2007.

Annual Ad Growth Contributions By Medium (Worldwide, North America)
	--------2006------		-------2007-------		-------2008------
	Global	N. America	Global	N. America	Global	N. America
Television	46%	48%	47%	36%	52%	48%
Radio	5%	2%	4%	4%	4%	5%
Newspapers	3%	-7%	7%	-2%	4%	-11%
Magazines	7%	8%	5%	4%	5%	10%
Cinema	0%	1%	0%	1%	0%	1%
Outdoor	7%	4%	7%	7%	6%	5%
Internet	32%	45%	30%	50%	28%	43%