New amended forecasts from Zenith Optimedia now predict (pdf) that global ad spend will decline 6.9% over the course of 2009, a downward revision from late 2008 numbers that foresaw a 0.2% drop, and the result of what the firm calls a “substantial turn for the worse” precipitated by “unprecedented economic problems.”
Though December 2008 forecasts predicted declining ad expenditure in North America and Western Europe this year, Zenith Optimedia now sees a steeper decline in these regions, with all areas of the world joining in the general decline. In response to these current conditions, Zenith tentatively forecasts a mere 1.5% growth in global ad expenditure in 2010 followed by 4.5% growth in 2011.
Internet advertising, which will account for a 12% share of ad spend in 2009 will be the only medium to see growth this year, though TV also is holding up relatively well because it is the last to be cut from budgets, Zenith Optimedia said.
Barriers to Recovery
According to Zenith Optimedia, this current and prolonged period of steep deterioration began Q308, accelerated in Q408, and has continued into Q109. Moreover, the firm said the market continues to be hampered by limited long-term visibility most advertisers wait until the last minute to confirm their spending commitments.
Zenith Optimedia cites lack of trust in the credit markets, low prospects for short-term growth, less consumer spending and brand-downgrading as impediments to ad market recovery. However, once bad debt is tackled and government stimulus programs take hold, Zenith believes advertisers should start to regain their confidence, though the firm cautions it will be a long process and will happen at different speeds in different markets.
Spending by Industry
Though spending by diversified and savvy CPG advertisers has generally held up well, the automotive industry is suffering from long-term problems that the downturn has exposed and exacerbated, the forecast said. The travel industry is seeing businesses cut back their travel expenses, but leisure travel remains popular, and airline advertising to consumers is still active in markets with strong exchange rates.
Spending by Region
Zenith Optimedia makes the following predictions for specific worldwide regions:
- Ad spend in North America will shrink by 8.3% in 2009 in the absence of quadrennial events such as the Olympics and presidential elections. This includes an 8.7% decline for the US and stable 0.2% growth for Canada.
- All major markets in Western Europe currently are suffering substantial decline in ad expenditure and the overall market is expected to drop 6.7%. With regard to specific countries, a 7.3% decline is expected in France, a 5.5% drop in Germany, a 5.0% drop in Italy, 10.1% drop in Spain and a 8.7% plunge in the UK. Overall spend is expected to drop 6.7%. In 2010, all major markets are expected to grow with the exception of Italy, which will shrink another 0.8%.
- Asia Pacific is expected to drop by 3.4% in 2009, including 5.4% growth in ad spend in China (down from 18.8% last year), 6.4% growth in India (down from 18.9%) and 7.9% growth in Indonesia (again down from 18.9%). Though these and several smaller markets are also still growing, they are being counterbalanced by sharp falls in other markets (-11.0% in Taiwan, -16.5% in Singapore and -20.0% in South Korea) and a 5.0% fall in Japan, which contributes 38% of the region’s ad expenditure.
- Central and Eastern Europe will suffer the sharpest drop-off in 2009, at 13.9%.
- Most markets in Latin America are still growing, but the region as a whole is being dragged down by two markets (Brazil and Colombia). Overall ad spend is expected to shrink 2.0% but will return to strong 7.1% growth in 2010.
Ad Spend by Medium
Despite the fact that media consumption – especially TV and internet – is increasing as the result of people going out less, the internet is the only medium Zenith Optimedia expects to attract higher ad expenditure in 2009, primarily because of its accountability and innovation in ad formats. The firm forecasts 8.6% growth in internet expenditure in 2009, though this is significantly down from 20.9% in 2008.
Most internet ad growth will come from search advertising, which the firm predicts will grow 9.0% in 2009. At the same time, classified is expected to grow just 1.8% and traditional display will shrink 1.8%. New formats are enjoying greater growth (29.8% from internet video and rich media, 29.7% from internet radio and 11.9% from podcasts), but these together represent only 12% of US internet expenditure, according to the analysis.
Once the economy improves, Zenith Optimedia expects internet ad growth to rise to 11.3% in 2010 and 15.3% in 2011 as its share of the ad market to rises to 14.6% in 2011, up from 10.4% in 2008.
Though Zenith Optimedia expects TV ad spend to fall 5.5% in 2009, it states that TV is doing relatively well in the downturn because advertisers slashing budgets generally cut TV last. The 5.5% decline still represents an increase in market share from 38.1% to 38.6%, and is expected to be be followed by a record 39.3% share in 2010.