Ad Forecasters Eye Slower U.S. Growth for 2013

4:01 PM PST 12/02/2012 by Paul Bond , Georg Szalai

After a 2012 boost from the Olympics and U.S. elections, financial problems in the euro zone and potential further conflict in the Mideast could also affect global growth.

After the 2010 and 2011 advertising rebounds following the recession and accelerated growth in 2012 due to the Olympics and elections, U.S. advertising growth will slow next year, prominent forecasters will tell a media and entertainment investor conference Monday.

At least one prognosticator also predicts weaker network TV trends in the U.S. amid ratings weakness.

Their outlook for global ad spending will diverge though, with one set to project higher growth and the other one predicting slower gains amid continued financial troubles in the Euro zone.

The latter, ZenithOptimedia, also cites the U.S. fiscal cliff (automatic increases in taxes and reductions in public spending that could come into effect in January) and the potential for further conflict in the Middle East, and therefore higher oil prices, as key risks to the 2013 ad outlook.

As is tradition, the U.S. and global ad outlook will be in the spotlight early Monday when Steve King, global CEO of ZenithOptimedia, MagnaGlobal and WPP's GroupM unit will share their 2013 forecasts in the opening session of the 40th annual UBS Global Media and Communications Conference here.

The conference traditionally also sees top media and entertainment executives weighing in on latest ad trends and the ad outlook for the new year. Big-name speakers this year include Time Warner CBS Corp. CEO Leslie Moonves, CEO Jeff Bewkes, Viacom CEO Philippe Dauman, Walt Disney CFO Jay Rasulo and Discovery Communications CEO David Zaslav.

Magna Global has reined in its latest forecast for worldwide growth in advertising. It now expects 3.1 percent growth next year, down from the 4.5 percent it predicted in June. The gain would also be down from a projected 3.8 percent worldwide jump this year to $495 billion.

“The revision is mostly caused by a slowdown in economic growth and continued economic uncertainty in Europe and the U.S., as well as the cautionary marketing spend that took place in the second half of this year," Magna Global's latest report says.

Due to a presidential election, which brought in a record $3 billion, and the London Summer Olympic games helping to make 2012 a robust year domestically, year-over-year comparisons will cause U.S. growth to weaken next year. While the U.S. is expected to boast 4 percent growth to $153 billion in advertising revenue in 2012, it will grow just 0.6 percent in 2013, according to Magna.

Some of the lagging areas of the world next year will be Western Europe, which should see ad revenue fall by 0.1 percent and the financially struggling Southern Europe, which should fall 4.8 percent.

Hot spots next year will include Central and Eastern Europe, which should grow by 7 percent, along with Latin America (up 11.9 percent) and Asia-Pacific (up 4.8 percent). China and India should also see double-digit growth and Brazil should begin to feel benefits next year from the Soccer World Cup tournament scheduled in the country in 2014.

Breaking it down by medium, digital will see 13.5 percent ad revenue growth globally in 2013, while out-of-home (which includes cinema advertising) experiences 3.4 percent growth, and radio grows 1.5 percent, Magna forecasts. Television will grow 2.3 percent.

Declining will be newspapers (down 3.4 percent) and magazines (4.3 percent.).

Meanwhile, ZenithOptimedia is predicting that ad revenue for major media worldwide next year will grow 4.1 percent, compared with 3.3 percent this year. It says ad revenue will reach $518 billion worldwide next year after $497 billion this year. Growth will accelerate to 5.6 percent in 2015.

The firm, though, slightly downgraded its expectations for U.S. growth in 2013 to 3.5 percent from 3.6 percent previously. That would compare to an unchanged expected 4.3 percent gain for 2012.

A big cut came to its network TV advertising forecast in the U.S. Zenith now expects network TV ad revenue to fall 2 percent as marketing money moves into cable, which should grow 7 percent next year. Network TV ratings have started off the fall season weaker.

ZenithOptimedia says the big four networks (ABC, Fox NBC, CBS) drew $9 billion at their upfronts this year, the same as a year ago and down from a high of $9.6 billion in 2004.

The firm praised NBC for turning a profit on the Summer Olympics despite paying an “enormous $1.18 billion” for the rights. ZenithOptimedia also called ABC’s decision to swap Jimmy Kimmel Live! with ABC News: Nightline beginning on Jan. 8 “the biggest change the daypart has seen since NBC’s failed experiment to move Jay Leno from late night to primetime.”

Internet advertising will exceed combined newspaper and magazine total spending globally in 2015, according to ZenithOptimedia.

"The euro zone crisis in particular is dragging down economic growth at the moment," ZenithOptimedia said. "This is because the euro zone is in recession, its imports from other countries are slowing down or shrinking, and the risk of euro zone collapse adds to global uncertainty, leading companies to hoard cash instead of investing in growth."

Another big risk to growth in 2013 are the U.S. fiscal cliff and the potential for further conflict in the Middle East, and therefore higher oil prices, it said.

As has been the case since the economic downturn began in 2007, it sees next year's global growth to be led by developing markets. It forecasts they will grow by 8 percent on average in 2013, while developed markets will grow by just 2 percent, weighed down by the eurozone crisis.

By medium, Internet advertising is supplying most of the growth in expenditures, "driven by rapid development in social media and online video," the firm said.

“Advertisers are willing to increase their budgets wherever they can achieve a strong return on investment,” said King. “This means that developing markets, social media and online video are all growing rapidly, supporting continued expansion in global ad expenditure despite stagnation in the eurozone.”

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