• by Joe Mandese , June 24, 2009

In its first attempt to forecast advertising growth in 2010, WPP's GroupM unit says, "the news is good," with the rate of the global ad recession easing, but nonetheless still contracting. GroupM, the world's largest buyer of media, estimates worldwide ad spending will decline 1.4% in 2010, following a decline of 5.5% this year.

 

"If our forecasts are right," GroupM Futures Director Adam Smith writes in the new report, released early this morning, "ad investment in 2010 will struggle to match 2004 in real terms."

Smith indicated the long-term outlook is especially hard to predict, noting that "few clients have decided what to spend in the fourth quarter of 2009, never mind 2010," but that GroupM nonetheless is betting that "some sort of recovery is at hand."

While that bet may be wrong, Smith said the assumption, which is based on a consensus of data from WPP agencies operating in 70 countries worldwide, is "near universal."

That said, the picture is still fuzzy, and the parts that are clear - mainly the outlook for traditional media - clearly are not looking too optimistic.

"Anyone looking for the bottom of the market may care to note ad investment in traditional media (excluding digital) is likely to fall 10% in the developed world this year," he writes, adding, "Many advertisers using these media will have encountered stronger media owners willing to sacrifice revenue rather than taking it in at even a moderate discount."

On the other hand, he says, there are "weaker media owners who will take business at almost any price," and that the result is pushing "media pricing past survival point.

"This destroys excess media inventory and forces media owners to merge," Smith points out. "When advertising demand recovers, it is likely to meet stronger vendors offering less inventory. Such conditions spell a risk of media price inflation. Advertisers can provide for this by diversifying."

While the outlook for digital media appears more stable, Smith declares it is "not recession-proof either," though he still sees digital's share of the global advertising market expanding to 15% by 2010, up from more than 10% in 2007.

He says the digital media expansion is being driven primarily by paid search and online video advertising.

The other major media to expand market share during the downturn are TV and out-of-home media, while newspapers "continue to shed a point of share a year."

The North American advertising marketplace will lag the global economy, Smith predicts, with ad spending declining 6.1% in 2010. That's an even more pronounced decline than 2009, which saw North American ad spending drop only 4.2%. In 2008, the beginning of the ad recession, North American ad spending fell only 2.0%.

Media USD m, current prices
	2008	2009f	2010f
NORTH AMERICA	167,492	160,441	150,578
yoy %	-2.0	-4.2	-6.1
LATIN AMERICA	18,769	20,064	22,203
yoy %	11.3	6.9	10.7
WESTERN EUROPE	106,739	94,548	91,433
yoy %	-1.4	-11.1	-3.5
EMERGING EUROPE	17,904	14,977	15,377
yoy %	11.2	-16.3	2.7
ASIA-PACIFIC (all)	116,866	113,579	117,174
yoy %	6.3	-2.8	3.2
NORTH ASIA	46,359	47,025	50,933
yoy %	18.6	1.4	8.3
ASEAN	8,827	9,210	10,196
yoy %	9.9	4.3	10.7
MIDDLE EAST & AFRICA	13,033	12,833	13,802
yoy %	20.7	-1.5	7.5
WORLD	440,803	416,443	410,566
yoy %	1.8	-5.5	-1.4

 

Source: GroupM's "This Year, Next Year" worldwide report.