Interpublic Group’s Magna Global lowered its 2012 worldwide ad revenue forecast today to $449 billion -- up 5%, or about 1.5% less than it previously predicted.
The IPG unit also downgraded its global forecast for this year, predicting that total ad revenues would be $427 billion -- up 4.7%, or 0.5% less than it previously estimated.
The revised outlook was issued today as Magna Global, Publicis Groupe’s ZenithOptimedia and WPP’s GroupM all presented fresh forecasts at the UBS Communications and Conference conference (The ZO and GroupM forecasts were reported earlier today.)
In the U.S., Magna indicated that total ad revenues in 2012 would be up 3.7% to nearly $153 billion. Next year’s growth, helped by the Olympics and political spending, will be more than a full percentage point higher than the growth of 2.9% expected this year, to total ad revenues of $147.2 billion.
Magna predicted that China’s advertising market will climb to the second-largest (behind the U.S.) in 2012 -- fueled by its own growth. but also by the tsunami-related troubles experienced by Japan, the country it is dislodging. China’s ad economy will grow more than 16% next year to $33.3 billion, surpassing Japan at $32.1 billion. Ad revenues in Japan will be down 2% this year.
The forecasters do not all agree that China will catch Japan that quickly. ZO, for example, foresees Japan remaining as the second-ranked ad economy at least through 2014. By then, China is expected be a very close third, and just 5% behind Japan in terms of overall ad expenditure.
That said, it appears to be just a matter of time before China becomes the second-ranked ad market.
If anything, said Steve King, global CEO of ZO, “we’ve underestimated” ad growth for the country. “There is huge upside there,” he said. Recent steps by the Chinese government to limit the amount of ads in certain genres of TV programming won’t curb demand by advertisers. “The government is managing growth,” he said.
Vincent Letang, Magna’s executive vice president. director of global forecasting, agreed. “There is huge demand” by the growing Chinese consumer class to emulate Western lifestyles, he said, which should keep demand booming for years.
More than ever, the Magna forecast stated, emerging economies drove global advertising revenue growth in 2011. Among these developing economies, Latin America posted the strongest growth rate, averaging 13.2%, closely followed by Central and Eastern Europe at 13.0%.
Developed markets grew at much slower rates, such as the 1.6% growth posted by Western Europe and the 3.1% garnered within North America.
Adam Smith, the top forecaster at GroupM, in his presentation at UBS, noted that in rapidly expanding markets, digital ad expenditure was the biggest driver of growth. Traditional media was the bigger driver in slower-growing markets.
Letang said he expected so-called cable “cord cutting” to continue in the U.S. at an annual rate of 500,000 subscribers for the next few years. But the impact on ad dollars should be minimal as marketers spend those dollars on channels and platforms that the cord-cutters migrate to.