• by Jack Loechner , Staff Writer @mp_research, April 20, 2009

According to a new release and ad spending forecast by ZenithOptimedia, current ad expenditure forecasts predict a steeper decline in North America and Western Europe, with all regions joining in the general decline. The report forecasts global ad expenditure to shrink by 6.9% over the course of 2009.

Entering Q2, 2009 says the report, there is limited long-term visibility in the market as most advertisers wait until the last moment to confirm their spending commitments. Many are treating advertising as a discretionary expense, and one they find convenient to cut. Unprecedented economic problems and events affecting the predicted 6.9% decline in global ad expenditure in 2009 include:

• Lack of quadrennial events (Olympics, elections) creates tough year-on-year comparisons for markets like the US
• Poor corporate confidence means very limited visibility in the market
• Consumers are putting off big purchases and shifting consumption from premium to value products, opening opportunities for advertisers with value to offer
• Consumers are spending more time at home, consuming more media, particularly television and the internet
• Search is driving internet growth as consumers use it to find bargains

Advertising Expenditure By Region (newspapers, magazines, television, radio, cinema, outdoor, internet; US$ million, current prices)
	2007	Y/Y Chg %	2008	Y/Y Chg %	2009	Y/Y Chg %	2010	Y/Y Chg %	2011	Y/Y Chg %
North America	$188,300	2.7%	181,269	-3.7	166,299	-8.3	163,811	-1.5	165,768	1.2
USA only		2.5		-4.1		-8.7		-1.7		1.1
Western Europe	120,177	6.0	118,894	-1.1	110,875	-6.7	112,090	1.1	115,835	3.3
Asia Pacific	99,583	6.8	102,584	3.0	99,071	-3.4	101,704	2.7	108,480	6.7
Central & Eastern Europe	31,634	22.4	35,071	10.9	30,190	-13.9	31,559	4.5	34,547	9.5
Latin America	26,422	16.3	29,676	12.3	29,070	-2.0	31,128	7.1	32,969	5.9
Africa/M. East/ROW	15,931	22.6	19,241	20.8	17,750	-7.7	19,664	10.8	23,069	17.3
World	482,047	6.7	486,734	1.0	453,254	-6.9	459,956	1.5	480,668	4.5
Source: ZenithOptimedia, April 2009

Ad expenditure correlates strongly with corporate profits, acknowledges the stuey, and the ad market is unlikely to start its recovery until profits start to pick up again. The current barriers to recovery include lack of trust in the credit markets, and low confidence in prospects for short-term growth. In addition:

• Consumers are spending less, saving more, and spending more time at home. Consumers are putting off the purchase of big ticket items and shifting their consumption habits from premium products to budget brands
• In the retail sector premium stores are bringing in value lines and advertising their presence
• In the finance category, corporate advertising has fallen off quite sharply, but consumers' increased appetite for saving and risk aversion means that savings accounts and certain types of insurance are still growing
• Spending by CPG advertisers has generally held up well; There has been a clear shift from premium to value products as companies respond to consumer demand
• The automotive industry is suffering from long-term problems that the downturn has exposed and exacerbated, but not caused. Regulations, high labor costs and other structural problems left auto manufacturers with very thin margins. In France and Germany, however, government incentives have led to increased sales in the short term, and increased automotive advertising. Smaller, generally foreign, brands have managed to gain market share by promoting their value proposition
• Businesses have cut back their travel expenses, causing a large drop in premium traffic for airlines. But leisure travel is still popular to countries where exchange rates now look very favorable to consumers spending in euros or US dollars. Airline advertising to consumers is still active in markets with strong exchange rates

Globally, some of the ZenithOptimedia ad expenditure projections include:

• Ad expenditure to shrink by 8.3% in North America in 2009
• All the major markets in Western Europe are expected to grow in 2010 with the exception of Italy, expected to shrink another 0.8%
• Asia Pacific is expected to drop by 3.4% in 2009, though expecting growth in ad expenditure in China, India, and Indonesia, counterbalanced by sharp falls in Taiwan, Singapore and South Korea and a 5.0% fall in Japan, which still contributes 38% of the region's ad expenditure
• Central and Eastern Europe is expected to suffer the sharpest drop-off in 2009, of 13.9%. Large drops seen in markets like Russia, Turkey and Ukraine are felt to be one time corrections by international advertisers as they reassess the long-term growth potential of these markets, and expect to see a return to growth in 2010.
• Most markets in Latin America are still growing, but the region is dragged down by Brazil and Colombia.

In considering global advertising expenditure by medium, the report concludes that, as consumers are saving money by spending more time at home, media consumption is increasing, particularly of television and the internet.

US Advertising Expenditure By Medium (US$ million, current prices)
	2007 ($x000)	2008	2009	2010	2011
Newspapers	$128,553	121,636	107,005	102,651	102,866
Magazines	57,789	55,136	49,046	47,549	48,155
Television	178,169	183,277	173,158	179,146	186,573
Radio	38,198	37,361	33,621	33,204	34,041
Cinema	2,287	2,421	2,336	2,472	2,675
Outdoor	30,546	31,395	29,276	29,914	31,792
Internet	41,352	49,994	54,298	60,438	69,695
Total	476,894	481,219	448,740	455,373	475,797
Source: ZenithOptimedia, April 2009

The internet is the only medium expected to actually attract higher ad expenditure in 2009, thanks to its accountability and innovation in ad formats, says the report.

Most of this growth will come from search advertising, concludes the study, as consumers considering a purchase are using search more as they seek out the very best deals. In the US, the report predicts search advertising to grow 9.0% in 2009, while classified grows just 1.8% and traditional display shrinks 1.8%. Internet video and rich media is forecast to grow 29.8%, internet radio 29.7% and podcasts11.9%, but these represent only 12% of US internet expenditure between them.

The study expects television ad expenditure to fall 5.5% in 2009, but this represents an increase in market share from 38.1% to 38.6%, followed by a record 39.3% share in 2010. Advertisers that cut budgets across the board will often cut television last, since they know it best and are convinced of its effectiveness, concludes the report.

Please visit ZenithOptimedia here for more details about the forecast.