World ad spending is expected to grow 4.3% in 2008 and 4.0% in 2009, according to revised forecasts (pdf) issued by Zenith Optimedia. These numbers are significantly lower than June forecasts, which were 6.6% and 6.0%, respectively, and are the result of the recent and widespread shocks in world financial markets.
Developed countries – hardest hit by the credit crunch – will suffer the largest declines, with forecast spending roughly cut in half in North America and Western Europe, Zenith Optimedia said. Stronger growth will come from developing markets and internet advertising.
North America is now expected to grow only 1.8% growth (down from 3.5% forecast in June) this year and 0.9% growth (down from 2.7%) next year, while ad spend in Western Europe will experience 1.6% growth (down from 3.7%) this year and 2.6% (down from 4.3%) in 2009.
Though forecasts for developing markets (everywhere except North America, Western Europe and Japan) have also been reduced because of vulnerability to cuts by multinational advertisers, growth in these markets remains healthy overall. Developing markets will contribute 65% of new ad expenditure between 2007 and 2010. Over that period, the proportion of global ad expenditure going to developing markets will rise from 28% to 32%.
Zenith Optimedia forecasts 6.6% growth for Asia Pacific this year and 5.2% next year. When Japan is excluded from this region, these figures jump to 10.1% and 7.1%. Central & Eastern Europe continues to grow at double-digit annual rates, and Latin America is expected to grow at about 10% a year, while the rest of the world accelerates from 8.1% growth this year to 15.2% in 2010.
The different growth rates of developing and developed markets indicates that the ranking of the world’s largest ad markets is changing quickly. By 2010, Zenith Optimedia expects Russia and Brazil to be top 10 ad markets – sixth and eighth largest, respectively – up from 13th and 11th in 2007. This growth is expected to push Spain and Australia out of the top rankings.
Internet advertising is expected to grow by an average of 23% per year between 2007 and 2010, and to increase its share of the world ad market from 8.6% in 2007 to 13.8% in 2010, up from 13.6% in the June forecast.
Outdoor is the only other medium gaining market share, according to the forecast. Contractors are investing in both traditional displays and digital billboards that capture the attention of consumers and advertisers. This medium is expected to attract 6.8% of world ad expenditure in 2010, up slightly from 6.7% in the June forecast.
Newspapers, magazines, television and radio are all losing share to the internet, with newspapers hit hardest. Newspaper ad expenditure is forecast to decline in 2008 and 2009, the first time any medium has shrunk since 2002. Advertisers will spend less in newspapers in 2009 than they did in 2006. Newspapers are expected to attract 23.3% of ad spend in 2010, 0.4 percentage points less than the previous forecast.
Luxury goods, travel, entertainment and other nonessential goods are the categories most at risk for spending cuts, while household goods, clothing and essential basics are least at risk. Spending patterns will vary between markets, but in general companies that provide non-essential goods or services are most likely to find their ad budgets under threat.