Zenith Optimedia Downgrades 2002 Forecasts

by Ken Liebeskind, Apr 18, 2002, 12:00 AM

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The Zenith Optimedia Group's latest quarterly update of its Advertising Expenditure Forecast, released earlier this week, is gloomier than expected with continued decreases projected for the rest of this year and beyond.

After ad spending dropped 5.4% in the world's top seven markets last year, it will fall 1.9% this year. "Despite sustained consumer confidence and signs of economic recovery in most of our seven countries, advertisers will only start spending when earnings improve," the report says. "We are forecasting decline in ad expenditures in 2002, and at least another two years when advertising growth will underform GDP."

After U.S. ad spending rose significantly in 2000, it dropped last year, to $134,996 million for all major media (newspapers, magazines, TV, radio, cinema, outdoor). This year it will drop to $132,564 million. Then it will rise the next two years, reaching $140,895 million by 2004. Spending will dip 1.8% in the U.S. this year, the report says.

The reports two major findings are that ad recovery lags general economic recovery and ad expenditure is still shrinking. While consumers have continued to spend through the downturn, advertisers have cut back due to fierce price competition and the need to limit expenditures to protect reported earnings, the report says.

Amidst the gloom is some talk of recovery. The report calls for small increases in total U.S. TV spending this year, thanks to healthy scatter budgets. Upfront spending increases next year are predicted, "with the major networks in the low single digits." Meanwhile, radio and out of home advertising are also recovering faster than expected. The biggest losers are print media, which "remain quite soft as national advertisers prioritize television." Print will not start recovering until "well into 2003."

Zenith Optimedia Group, which issues its ad spending reports twice annually, is owned by Publicis S.A. and Cordiant Communications Group, and is the world's fourth largest media company.

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