Zenith Reduces U.S., Global Ad Outlook: Internet Only Medium To Gain, Albeit More Slowly

We're not out of the woods yet. According to at least one respected ad industry forecaster, Publicis' ZenithOptimedia Group, the rate of global ad budget erosion is declining, but it is still eroding this year, and will post only moderate growth in 2010. The outlook for the U.S. advertising marketplace is even worse. According to the agency's most recent forecast issued this morning, domestic ad spending will decline 12.9% in 2009, and will erode another 4.4% in 2010 on top of that. The U.S. ad market, in fact, will not rebound until 2011, when ZenithOptimedia projects only a tepid 0.7% gain.

"More details have emerged about how painful the first half of 2009 was for the media industry," ZenithOptimedia explains in the new report. "The world's largest media owners suffered an average 13.1% drop in their media revenues in the first six months of the year, and this probably understates the decline suffered by the industry as a whole. The average figure does not include the results of the US publisher and broadcaster Tribune Company, which entered Chapter 11 bankruptcy in December 2008. It does include 4.0% growth from Google, which has been the main beneficiary of growth in internet advertising - the only form of advertising that has continued to grow. Apart from Google, every one of the top media owners shrank in the first half of 2009."



As a result, the agency revised its global ad expenditure growth projection to -9.9% from a more optimistic -8.5% released in its last outlook in July.

The internet is the only medium we expect to grow in 2009, by 9.2%. This is slightly lower than the 10.1% growth we forecast in July, but we have downgraded internet advertising by less than the market as a whole. Most of this growth is coming from paid search and innovative formats. In the US - where we have the most detailed breakdown of internet advertising by type - we forecast paid search will grow by 20% in 2009, while internet video grows 19%, social media grows 45% and mobile grows 69%. Traditional display and classified are practically static in comparison: we forecast them to grow by 3% and 2% respectively this year. Globally, we predict internet advertising to account for 14.9% of all ad expenditure by 2011, up from 10.2% in 2008. Among the major media, ZenithOptimedia expects only the Internet to see any growth, and even that has been tapered back some from earlier, more robust online ad spending forecasts.

"All other media are shrinking. Most are shrinking at around the market average rate, but newspapers and magazines are in steep decline," the agency reports. "We forecast newspaper ad expenditure to fall 17% this year, and magazine ad expenditure to shrink 20%. In both cases this is a particularly severe example of a longer-term trend; these media have been in decline since 2007, and we expect them to remain in decline for the rest of our forecast period. By 2011 we forecast newspaper ad expenditure to be 25% below its 2007 peak, while magazine ad expenditure is 28% below its own peak. Prospects for other media are more encouraging: we expect television, cinema and outdoor advertising to return to growth in 2010, followed by radio in 2011."

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