Commentary

Institutional and Alternative Media Underpins Ad Growth Forecast

Institutional and Alternative Media Underpins Ad Growth Forecast

Following up last week's Mediapost review concerning projected out-of-home ad spending, with additional details about the Total Communications Forecast from Veronis Suhler Stevenson,  total communications spending is projected to increase 5.4% to $923.91 billion in 2008, as strong gains in the institutional and alternative media sectors offset the downward pressure of declining traditional advertising spending.

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These forecasted gains include important media trends:

  • Broadcast TV will surpass newspapers as the largest ad medium in 2008, while total Internet ad spend will surpass broadcast TV in 2011
  • Consumer media use declined slightly in 2007 as some platforms near saturation, while institutional media use increased due to mission-critical information demand
  • Total communications spending is forecast to expand at a CAGR of 6.1% from 2007- 2012 to $1.2 trillion, fueled by continued growth in institutional and alternative media

 Institutional media spending is expected to increase 8.5% to $245.39 billion in 2008, according to the VSS Forecast. Total spending on communications will continue to outpace U.S. economic growth during the 2007-2012 period, increasing at a 6.2% CAGR compared with a 5.6% CAGR for nominal GDP. Communications will be the second-fastest growing of the 15 U.S. economic sectors during the forecast period and will exceed $1 trillion in 2010, with spending reaching $1.183 trillion in 2012.

 Jim Rutherfurd, Executive Vice President and Managing Director at VSS, says "... While current economic conditions are contributing to the underperformance of traditional advertising and marketing segments, various institutional, consumer and alternative media segments are outperforming GDP due to... businesses demanding dynamic workflow solutions for competitive global markets, consumers taking ‘staycations' this summer, spending on entertainment media targeted at the youth market, and brand marketers shifting to alternative media to engage hard-to-reach demographics."

 The study indicates that consumer spending on communications as a share of disposable income is expected to increase this year.

  • Spending on videogames is projected to climb at a double-digit rate
  • The movie industry experiences its strongest summer on record
  • Home video sales and rentals increased during the first half of 2008 after declining in two of the past three years
  • Total consumer spending on media is expected to increase 6.1% in 2008 to $218.37

 Spending on alternative media will climb 21.0% to $81.67 billion in 2008, and account for 17.7% of total advertising and marketing spending, up from 6.9% in 2002. Traditional advertising and marketing will increase only 0.4% in 2008 to $378.48 billion, despite a 1.8% decline in traditional advertising, as newspapers, consumer magazines and broadcast radio all post declines for the year.

This will be the first economic slowdown in which online search, digital out-of-home media, word-of-mouth marketing, videogame advertising, and social network advertising will be seriously tested. As a result of these trends, VSS projects that broadcast TV will become the largest advertising medium by year-end 2008, the first time in U.S. history that newspapers have not held that position.

For the third consecutive year, overall time spent with media by consumers is expected to fall in 2008, declining 0.1% to 3,493 hours per person, due to media multitasking and several media platforms reaching saturation, including some that will become obsolete during the forecast period, including dial-up access, VHS, and audio cassettes. Time spent with media that have a digital component, however, is expected to climb. Pure-play internet will surpass recorded music as the third most used medium after television and radio.

Meanwhile, time spent by institutions on select media, such as professional information, business-to-business magazines, and outsourced corporate training, will continue to rise, climbing 4.2% in 2008 to 301 hours per employee, as technological advances allow businesses to access information 24/7. Time spent with media by consumers and businesses will rise 0.3% to 3,773 hours per person in 2012, driven by gains in consumer and institutional media usage of digital platforms.

VSS projects that six segments will continue to exhibit double-digit gains over the next five years, while only newspapers will exhibit a decline during the forecast period, falling at a 2.4% CAGR. Double-digit gainers are:

  • Word-of-mouth marketing
  • Pure-play internet & mobile services
  • Branded entertainment
  • Out-of-home media
  • Outsourced custom publishing
  • Professional & business information services

A synopsis of communications industry spending and growth divided by the four major industry sectors and 20 different media segments tracked in the VSS Forecast is included here:

Communications Industry Sector Spending Projections

Sector

2012 Spend ($B)

2007-2012 CAGR (%)

Marketing Services

$307.30

5.80%

Institutional End User

341.6

8.6

Advertising

262.61

4.3

Consumer End User

272.41

5.8

Total Communications

1,183.37

6.2

Nominal GDP

-

5.6

Source: VSS, PQ Media, August 2008

 

Communications Industry Segment Spending Projections

Segment

2002-2007 CAGR

2012 Spend ($B)

2007-2012 CAGR

Cable & Satellite TV

10.4%

$188.92

7.35

Professional & Business Info Services

11.3

206.49

10.0

Direct Marketing

6.0

236.2

5.6

Entertainment Media

2.6

110.35

5.2

Newspaper Publishing

0.3

55.3

-2.4

Broadcast TV

2.8

58.84

3.8

B to B Promotions

3.8

52.47

2.5

Consumer Promotions

3.2

53.87

3.3

Pureplay Web and Mobile Services

12.6

72.31

14.3

Educational & Training Media Services

6.8

47.42

6.8

B to B Media

4.8

32.95

5.9

Consumer Magazine Publishing

2.8

25.52

1.0

Consumer Book Publishing

3.8

28.1

3.5

Branded Entertainment

13.4

40.71

12.8

Broadcast & Sat Radio

2.3

23.94

1.9

Yellow Page Directories

1.4

16.57

0.7

Out-of-Home Media

10.3

12.89

10.3

Outsourced Custom Publishing

16.5

9.21

11.0

Public Relations

10.6

6.86

9.9

Word of Mouth Marketing

49.8

4.47

27.1

Source: VSS, PQ Media, August 2008

Please visit here to read more of the original report from VSS,

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