U.S., Global Ad Growth to Accelerate in 2012 Driven by Special Events
NEW YORK - After the 2010 rebound following the recession, U.S. and global advertising growth continued this year, with prominent forecasters projecting accelerated momentum in 2012.
As is tradition, the ad outlook will be in the spotlight early Monday when Steve King, CEO of ZenithOptimedia, MagnaGlobal's Vincent Letang and Adam Smith, futures director of ad conglomerate WPP's GroupM unit, will share their 2012 forecasts in the opening session of the 39th annual UBS Global Media and Communications Conference here.
King will tell the media and entertainment investor conference that global spending on major media will grow 4.7 percent to $486 billion in 2012 following an estimated 3.5 percent improvement this year to $464 billion. The figures are below the firm's previous prediction for an already-lowered 3.6 percent gain this year and 5.3 percent next year.
A continuing slowdown and debt worries in Europe will next year be offset by the quadrennial effect of the U.S. presidential and other elections, the Summer Olympics and the European soccer championship. Plus, Japan’s recovery from the effects of the earthquake in March will also provide upside next year, Zenith predicts.
All these factors will add $7 billion to ad spending in 2012, it says. Excluding them, worldwide ad expenditures would grow 3.1 percent next year, slightly less than this year, Zenith says.
The firm then expects global ad expenditure growth to accelerate further to 5.2 percent in 2013 and 5.8 percent in 2014.
In comparison, in the more mature U.S. market, advertising on major measured media, which excludes direct mail, telemarketing and PR, is expected to increase 2.2 percent in 2011 to $154.9 billion and 3.5 percent in 2012 and 2013, in line with previous estimates. That will be followed by a 4.3 percent increase to $173.2 billion in 2014, the firm forecasts.
Zenith had previously said that the U.S. ad market is unlikely to reach the 2007 pre-recession spending level of $177.7 billion until 2015 or 2016.
"There has been some downgrade in spending in the fourth quarter, but we are quite reassured," King told The Hollywood Reporter about current ad market trends. "There has been no dramatic change like we saw in 2008."
Looking to next year, he said that "compared to 2008, advertisers are in much stronger final positions, even in tougher economic times…We looking for quite a robust figure and advertisers to stay their hand."
Zenith forecasts that U.S. ad gains will also gain speed next year, but that growth will remain below the global rate in the coming years due to the maturity of the largest ad market in the world.
"The [U.S.] economy is in a much better place than it was two years ago," King says.
He highlights the "continued resilience" of TV advertising in the U.S. and the world, continued digital growth and further improvements in foreign growth markets, such as Asia, Central and Easter Europe and Brazil.
The Internet’s share of global ad expenditures will rise from 15.9 percent in 2011 to 21.2 percent in 2014, exceeding 30 percent in four markets, according to Zenith. It also forecasts that Internet spending will for the first time top newspaper ad spending in 2013 with $97.8 billion compared with $88.8 billion.
Overall, King highlighted the ad market continues to be characterized not by "the exuberance of the 1980s and '90s, but continued spending on proven, trusted ways of getting returns" like TV and the Web.
In terms of different media categories in the U.S., Zenith projects network TV will end 2011 down 2 percent followed by a 1 percent drop next year since the Olympics on NBC will take place in London, which means a time difference.
Meanwhile, Zenith anticipates cable ad spending to rise 12 percent this year, and 10 percent next year.
Internet spending will rise 12.6 percent and 16.4 percent, respectively. And cinema ads will rise 3 percent this year, half of the previous forecast due to a large drop in communications and government spending, and 5 percent in 2012.
GroupM in its biannual worldwide forecast is calling for ad growth in measured media of 5 percent this year to $467 billion, followed by a 6.4 percent gain next year to $522 billion. The figure is down from a global forecast of a 6.8 percent jump in 2012 made in July.
For the U.S., GroupM predicted 2011 ad spending of $147 billion, up 3.3 percent, down from a previous estimate of a 3.8 percent hike. For 2012, the firm sees U.S. ad spending rising 4 percent, instead of 4.2 percent previously, to $153 billion.
“Japan's advertising recovery has proved substantially more vigorous and resilient than we forecast in our mid-year report,” said Smith. He also cited digital ad spending as a key driver. “We expect digital to comprise 22 percent of all measured ad investment in mature Western economies in 2012, and 12 percent in the faster-growing world,” he said.
Meanwhile, Brian Wieser, who as former global director of forecasting at MagnaGlobal used to attend the UBS conference, is now senior research analyst at Pivotal Research Group. He eyes U.S. ad growth of 1 percent in 2012 on a normalized basis, meaning adjusted for the impact of political and Olympic-related activity. That would be slower than this year's projected 2.5 percent gain.
Including political ads and Olympics, ad spending will grow 2.5 percent after a 1.2 percent improvement this year, Wieser predicts.
"We do not foresee any significant new categories/brands emerging in 2012" amid a soft economy, he wrote in his forecast last week. "We expect that spending levels will generally flatten through the middle of 2012, after which the impact of status quo “new normal” should return, with weak growth in the periods that immediately follow."
He also echoed a theme that King also sees dominating 2012, predicting that ad media will feel a haves versus have-nots crunch. "Simply put, in scarce times, marketers are concentrating their budgets among their primary medium (often network TV for large brands seeking awareness) and a secondary medium (often digital platforms for traditional brand marketers, who typically pursue engagement-based outcomes among a subset of the population who are aware of their brand attributes)," Wieser said. Print and other traditional media are likely to feel pressure though.
Pivotal sees paid online search growing the most in 2012, expanding from $14.8 billion to $17.0 billion. But he is less optimistic about national cable ad spending. "That medium should slow significantly in 2012, rising by only 4.8 percent, compared to a gain of 9.0 percent in 2011," Wieser said.