All The Ad Forecasts Add Up To Less

by Jack Loechner, Dec 18, 2008, 8:15 AM

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According to a recent Bloomberg report by Tim Mullaney, the deepening U.S. recession will cause worldwide advertising spending to shrink next year for the first time since 2001, collected from findings at ZenithOptimedia and Interpublic Group of Companies.

Zenith said that ad spending will slip 0.2 percent to $490.5 billion in 2009, led by a 6.2 percent drop in the U.S.. In October, Zenith predicted the market would expand 4 percent next year, down from the 6 percent growth it forecast in June.

The U.S. ad market is expected to shrink 3.8 percent this year, after it predicted 0.7 percent growth two months ago, according to the report. Worldwide spending will rise 1.3 percent to $491.6 billion this year.

Bruce Goerlich, head of U.S. research for Zenith, observes that "This is about consumer confidence and consumer spending... More than any recession in the recent past, this will be driven by consumers...  when consumer spending takes a hit, advertising takes a hit."

U.S. spending on TV ads, the largest part of the industry, will fall 6.7 percent, and magazine ads will drop 5 percent, Goerlich reported. Internet spending will rise 18 percent, both in the U.S. and worldwide, Zenith finds, as emerging ad formats such as Web video make up for slower growth in banner ads.

"The biggest hit in TV is the spot market," Goerlich said, referring to ads sold shortly before airing, and not during the annual up-front market. "What saved spot this year was the election... "

Robert Coen of Interpublic's Magna unit said he expected a 0.3 percent drop in global ad spending next year, including a 4.5 percent decline in the U.S.

The WPP Group M unit forecast a 0.2 percent global decline, including a 3.2 percent drop in the U.S.. Adam Smith, for Group M, said "Advertising will fall less than the broader economy because marketers will need to maintain spending to protect market share."

And  according to a recent forecast from Borrell Associates, overall 2009 spending on traditional, offline media will decline 1.4%, and spending on interactive will increase 7.2% but says that these figures do not tell the whole story.

A slow-to-no growth forecast in the US for "standard" components of the interactive advertising market - such as banner, display and pop-up ads - is not cyclical and shows no signs of improving quickly, even if the nation's economy starts to move upward, says Borrell.

The spending levels by local advertisers, which grew at a 47% rate this year, are expected to slow to 8% in 2009

Local Interactive Ad Spending
Year	Local Ad Spend (Billion $)
2007	$8.7
2008	12.9
2009 Fcst.	13.9
Source: Borrell Associates, 3Q, December 2008

Future dollars are likely to be spent on other forms of interactive advertising, such as email, paid search and streaming video - which is expected to see the biggest spending growth, according to Borrell.

Finally, eMarketer has revised its projections for US social network ad spending, anticipating that advertisers will spend $1.2 billion on social networks this year, down from the previous projection of $1.4 billion made in May. Spending will reach an estimated $1.3 billion in 2009, down from the previous projection of $1.8 billion.

eMarketer senior analyst Debra Aho Williamson, said "Marketers should not write off social networks completely... with a relatively small investment, companies can use social networks to cultivate relationships with customers who have... already expressed interest in their brand or product."

US Online Social Network Ad Spending (Million $ and % Change)
Year	Ad Spend $	Percent Change
2008	$1,175	33.8%
2009	1,295	10.2
2010	1,335	3.1
2011	1,420	6.3
2012	1,515	6.7
2013	1,640	8.3
Source: eMarketer, December 2008

In addition, slower-than-expected revenue growth at MySpace is one of the  reasons for the lowered forecast.

US Online Social Network Advertising Spending, by Venue (million $ and % of total)
Venue	2008	2008 % of Total	2009	2009 % of Total
MySpace	$585	50.0%	$630	48.7
Facebook	210	18.0	2230	17.7
Other destination social networks	340	29.0	365	28.2
Widgets and applications	40	3.0	70	5.4
Total	$1,175	100	$1,295	100
Source: eMarketer, December 2008

Although the outlook for ad spending is challenging, there are still many benefits to using social networks and they remain a viable marketing venue. Monitoring social network discussions about a brand or product and interacting with consumers in a community are still valuable-and probably essential-activities.

For the Borrell report executive summary, please visit here. To read the Bloomberg report, please visit here.

To review the eMarketer article, please visit here.

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