ZenithOptimedia Cuts Global Ad Growth Forecast Due to Middle East Uprising, Japan Earthquake
The company boosts its U.S. growth estimate for 2011 and its global expectation for 2012, and now sees China becoming the No. 3 ad market this year and the Internet becoming the second-largest ad medium in 2013.
NEW YORK - ZenithOptimedia has cut its global advertising growth forecast for 2011 from 4.6% to 4.2% due to the turmoil in the Middle East and the earthquake in Japan, but it increased its estimate for U.S. gains this year and next amid a continuing rebound. It also raised its percentage gain expectation for 2012.
The media planning and buying agency in a first estimate said the events in Japan and the Mideast will reduce ad expenditures by a total of $2.4 billion in those regions this year, but this will not derail the global upswing.
Zenith’s global ad spending forecast for major media for 2011 is now $470.8 billion, slightly higher than its previous estimate of $470.4 billion unveiled in December given that it reported a higher than originally expected 2010 ad spending total of $451.9 billion. However, given the events in Japan and the Middle East and this higher starting point, the company reduced its global growth percentage estimate for the year.
It said North American ad spending will hit $164.8 billion this year, up 2.6%.
"The underlying recovery remains healthy" following the recession when excluding the special events in the Middle East and Japan, Zenith said.
Zenith now expects the Internet and China to reach key milestones earlier though than it previously forecast.
Zenith sees the Internet overtaking newspapers to become the world’s second-largest advertising medium in 2013 after previously saying they'd be about equal in terms of ad spending that year.
And after previously predicting that by 2013 China would overtake Germany as the third-largest ad market in the world, Zenith now sees that happening this year.
The company has increased its U.S. growth forecast from 2.4% to 2.5% this year (to $155.2 billion) and from 2.8% to 3.4% next year, but slightly reduced it from 3.3% in 2013 to 3.2%. Last year saw a 2.3% gain. Among the drivers have been better trends in such areas as the Internet and radio and continued TV gains.
Tim Jones, CEO ZenithOptimedia, North America, said consumer confidence and stock markets are on the rise in the U.S., but unemployment and housing remain challenges, meaning that it will take more time until the U.S. ad market reaches the pre-recession spending level of 2008.
U.S. Internet ad spending growth will remain in the doube-digit percentages over the coming years, Zenith predicts. And TV trends continue to look healthy, with his firm eyeing U.S. TV growth of 5.1% and 4.8% this year and next with cable TV being the biggest driver of gains, but broadcast spending also looking solid.
“We are seeing increased budgets going into this upfront fueled by auto, financial and retail,” Jones said, adding price increases could hit the double digits. “Plus, scatter market prices have been up from last year's upfront in the 25%-40% range. That's a signal of advertiser demand.”
Zenith upgraded its forecast for 2012 global ad growth from 5.2% to 5.8%. The rebound in Japan and the Middle East after this year's shocks are among the factors it cited. So is a "further strengthening in Western and Central & Eastern Europe, where advertisers are becoming more confident of the long-term economic prospects," according to Zenith.
Discussing the political turmoil in the Middle East and the earthquake in Japan and their effects this year, the firm said: "These events had immediate consequences for advertising in the affected markets. In Egypt – by far the largest ad market to be caught up in the Middle Eastern uprisings – there was almost no advertising on television during the revolution, and in the aftermath advertisers have been very careful about the content and placement of their messages."
In Japan, broadcasters "replaced almost all commercial ad slots with public-service announcements for weeks after the earthquake, and blackouts and distribution problems will hinder media consumption for months to come," the firm said.
Japan ad expenditures are projected to shrink 4.1% this year, then grow 4.6% next year, while Egypt will see this year’s 20.0% drop follow up with 12.1% growth in 2012.
Developing markets' role in ad spending will continue to rise. Zenith sees China overtaking Germany as the world’s third-largest ad market this year, while Brazil will overtake France to take sixth spot.
Russia will rise from 12th place in 2010 to 10th this year and and seventh in 2013.