Olympics, elections not enough
U.S. ad spending will rise, but growth to lag behind global gainsAdvertising spending growth in the U.S. will continue to underperform global gains next year as the Olympics, U.S. elections and continued Internet advances will be counterbalanced by sluggish basic underlying trends.
That was one key theme of two closely watched forecasts unveiled Monday at the annual UBS Global Media & Communications Conference here.
Bob Coen, director of forecasting at media agency Universal McCann, forecast a 3.7% gain in U.S. ad spending in 2008 to $294.4 billion, higher than this year thanks to the Olympics and the U.S. presidential election.
In his first stab at the 2008 outlook published this year, Coen said that U.S. ad spending would reach $305 billion, up 5% from his 2007 forecast at the time. Coen on Monday further lowered that 2007 prediction to $283.9 billion, which would amount to a 0.7% gain for the year. In the summer, he projected an already lowered 3.1% gain.
Meanwhile, ZenithOptimedia CEO Steve King on Monday estimated that U.S. ad expenditures for major media would rise 4.1% in 2008. He also reiterated a recently downgraded 2007 growth forecast of 2.5%. A year ago, King predicted a 4.1% increase for the current year but then lowered that twice.
King projects global ad spending on major media to rise 6.7% in 2008 to $485.6 billion, after a 5.3% gain this year to $455.1 billion. Coen predicts a global ad gain of 4.6% to $653.9 billion.
Overall, the global ad market will accelerate in 2008 despite the recent housing market and credit crunch thanks to emerging markets and the benefit of special events, Zenith said. King also argued that the last ad recession came on the heels of the dot-com bust but that the Web market today is more developed and rational.
"Developing markets have taken over as the main contributors to global growth, compensating for slow growth in developed markets," Zenith said. For example, by 2010, China will be the fourth-largest ad market, and Russia will be sixth, according to Zenith.
Besides the Olympics and U.S. elections, the global ad market also will benefit from the European soccer championships in Austria and Switzerland in the summer, King said. Without them, worldwide growth would be basically unchanged from 2007.
King projects $2 billion in 2008 political spending, only to be outdone by what he estimates will be a $3 billion boost from the Beijing Olympics. The European soccer competition will add $1 billion to the global ad pie.
In another key success story, the Internet will overtake magazines as the world's third-largest ad medium in 2010, Zenith said.
In the U.S., Coen sees ad spending for the Big Four broadcast networks up 2.2% in 2007 (to $17 billion), with cable TV up 6% (to $20.5 billion), Internet up 20% (to $10.9 billion) and national radio down 3% (to $3.4 billion). Next year, he expects 5% growth for the broadcast networks and cable TV, a 16.5% Internet advance and a 1% radio gain.
Also at the UBS conference Monday, CBS Corp. chief research officer David Poltrack predicted the same level of underlying growth next year as in 2007. He predicted a 7% ad gain for the broadcast networks in 2008 driven by the Olympics and U.S. elections. The underlying gain when excluding these one-time factors will amount to 4%, he told the UBS conference.
For 2007, Poltrack said growth will come to 2% rather than the 3% originally projected, amounting to an underlying gain — excluding the Olympics effect in 2006 — of 4% instead of his original 5% estimate. He cited a sluggish first half of the year as a key factor for the shortfall.
Ad scatter markets have remained strong going into 2008, Poltrack said. A "very strong" fourth quarter has allowed momentum to carry over into 2008, with some second-quarter orders already having been made, he said.
Media and entertainment industry CEOs on Monday also chimed in with comments on the outlook of the ad market.
NBC Universal president and CEO Jeff Zucker predicted a "good" 2008 for his firm's TV station group thanks to the Olympics and elections.
Viacom president and CEO Philippe Dauman said ad momentum "continues to be strong" for the company's cable networks. Scatter market pricing is up in the double-digit percentage range, and fourth-quarter domestic ad revenue remains on track to match third-quarter gains of 5%, he said.
Said Dauman, "We really look forward to 2008 and a continued robust ad environment for us."