• by Joe Mandese  @mp_joemandese, January 28, 2008

In the face of numerous other downward ad forecast revisions, and increasing prospects for an economic recession, WPP's GroupM unit has issued a new report calling for relatively healthy growth in the global ad economy during 2008. Growth in the U.S. marketplace will be more tepid - rising 3.7% - and it will come almost entirely from two factors: cyclical stimuli like the Olympics and elections; and increased ad spending on the Internet. Without the incremental effects of the Olympics an election spending, GroupM predicts U.S. ad spending will rise only 1.8% this year. And without the effects of the Internet, the U.S. ad market would rise only 0.6%, about the same rate it grew during 2007.

"We have been bearish on the USA since we started publishing these forecasts in 2006: soft house prices trumped strong profits. Demand for traditional media appears to have anticipated the current global slowdown," GroupM Futures Director Adam Smith writes in the new report, the latest quarterly installment of its "This Year, Next Year" series.

Despite the Internet's soaring rate of growth, it still will only the second largest contributor to total global ad spending growth this year. TV, which its much larger base, and strong rate of growth in developing nations, will account for half of the incremental ad spending during 2008, Group M predicts. Worldwide ad spending is projected to rise 6.8% this year, according to GroupM.

By comparison, the Internet - on a much lower base - will account for nearly a third of global ad spending growth.

"We estimate that measured Internet will occupy 10% of global media investment in 2008 and contribute 28% of growth," Smith predicts, noting, "Internet revenue is still conventionally reported as a single figure encompassing display, search, classified and sometimes a small amount of e-mail. But it is misleading to treat this as a single medium. In particular, we would prefer to isolate search, which is mainly used for direct marketing, from display. They serve different advertisers in different ways and require different management.

"In this report we make a start by indicating in many countries the proportion of internet revenue which is search. Search is the largest component of internet spending (we estimate 60% worldwide) and the fastest growing component as well: it is thus the biggest contributor to media revenue growth in the developed world.

Noting that search ad spending will "stabilize sooner or later," Smith says online display advertising will continue to accelerate, especially as advertisers begin exploiting rich media and online video advertising formats that blur the line between branding and direct ROI marketing strategies.

"The overlap between the two will grow too, as display advertisers embrace search techniques to complement their traditional advertising, and vice-versa. A large part of internet display already invites direct response," he predicts.