Ad Growth to Continue in 2011; China Rising to Become No. 2 Ad Market
Ad forecasters attending Monday's Global Media and Communications Conference also say Internet will overtake newspapers as second-largest ad medium behind TV in the coming years.
NEW YORK -- After a post-recession advertising rebound in 2010, U.S. and global ad growth will continue in the modest single digit percentage range next year, prominent ad forecasters will tell a media and entertainment investor conference here on Monday.
The global market will grow at a lower rate than in 2010 after the current year saw a particularly strong bounce-back after the recession and featured Olympics-related spending, while economies are still expanding at a sluggish pace, with debt concerns rattling some European countries. But prognosticators have generally upgraded their global forecasts ahead of the end of the year. And starting in 2012, worldwide and U.S. ad growth rates should pick up again, they predict.
U.S. ad gains will remain below the global growth rate due to the maturity of the largest ad market in the world, and stay more muted than in the past coming out of a particularly deep recession, with at least one forecaster calling the growth he forecasts for 2010-2013 "disappointing." But experts expect that underlying U.S. ad spending growth, meaning figures adjusted for this year's Olympics and political ad boon, will accelerate slightly in 2011 amid a continuing economic healing process.
As is tradition, the 38th annual UBS annual Global Media and Communications Conference will on Monday morning feature a panel of prognosticators who will provide an ad outlook for 2011 and beyond and a review of 2010. Brian Wieser, global director of forecasting at MagnaGlobal, Adam Smith, futures director at GroupM, and ZenithOptimedia's worldwide CEO Steve King will present their respective forecasts, and media and entertainment executives are expected to chime in with latest ad market color throughout the conference, which runs through Wednesday.
King plans to tell his audience that global ad expenditures will finally exceed their previous 2008 peak in 2012 as economics continue to leave the recession slump behind step by step.
Monday's panel will also make predictions that signal a changing balance of power in the ad world. For example, ad experts expect that global Internet ad spending will catch up to or even exceed newspaper ad spending by 2013 and that China will continue to rise in the ranks of top ad markets.
Wieser forecasts U.S. ad growth of 4.1% this year to $170.3 billion, or 2.8% when normalized for the year's benefits from elections and the Olympics, followed by 3.1% on a normalized basis in 2011, signaling improving underlying dynamics. When not adjusting for what he estimated to be an Olympics and political ad benefit of around $2.5 billion in 2010, next year's growth rate will be lower. Between 2010 and 2015, Wieser expects average U.S. ad growth of around 3.5%.
Wieser also projects global ad growth of 5.4% to $412 billion in 2011, on a constant currency basis, up from his previous 4.2% forecast. For 2010, he has raised his growth assumption from 5.6% to 6.9%.
"2010 is coming off a terrible 2009," he explained the expected slower growth rate next year. "This creates a distorted perception, but 2011 will grow at a historically healthy cliff."
Despite debt challenges in Greece and Ireland, "the ad-supported media economy is firmly on a path towards sustained gains in most countries around the world," MagnaGlobal believes. Through 2016, it expects global ad spend to see a compound annual growth rate of 6.3%.
Using his firm's different data sets, King is predicting U.S. ad spending on major media to rise 2.2% this year after a 12.9% decline last year. For 2011, he eyes a 2.4% gain. Better trends in such areas as the Internet and radio could help make up for weaker growth in the TV market, which has been red-hot this year coming out of the recession and benefiting from political and Olympics spending, his firm suggests. After a TV ad gain of about 7% this year, his firm eyes a plus of 4% next year and 3% the following year, with cable TV remaining the main growth driver. Overall, he calls the 2010-2013 U.S. ad growth outlook of about 9% "disappointing."
But Wieser highlighted that when normalizing for Olympics and politics, his forecast still calls for higher TV ad spending growth in 2011 than in 2010.
Next year's overall U.S. ad growth will be followed by stronger 2.8% and 3.3% improvements in 2012 and 2013, King estimates. "The U.S. market is a relatively larger and more mature market," he explained why the growth rate will be below the worldwide figure. "But we expect steady recovery."
Worldwide ad spending on major media will rebound from a 2009 decline of 10.6% to rise 4.9% this year to $449.7 billion -- up from a previous 4.8% forecast, King will tell the UBS conference. It is the firm's fifth consecutive increase to its forecasts. He expects a gain of 4.6% next year and 5.2% each in 2012 and 2013. "Until advertisers are fully confident that the economic recovery will be sustained, we expect growth to remain below its long-term trend rate of 6%," ZenithOptimedia predicts.
Forecasters expect developing countries, such as Brazil, China, Russia and India to remain key engines of global growth in the coming years. In terms of ad categories, the Internet and mobile are expected to be key drivers.
ZenithOptimedia predicts that by 2013, China will overtake Germany as the third-largest ad market in the world and be "hot on the heels of Japan," ZenithOptimedia's CEO North America Tim Jones told The Hollywood Reporter. MagnaGlobal even expects China to become no. 2 behind the U.S. by 2013.
On a global basis, online advertising will overtake newspapers as the second-largest ad medium by 2013, Magna predicts, while Zenith expects the two to attract about equal amounts of ad spending in 2013.
Online video will be a key growth area in the Web space, with Wieser projecting it will capture $4.7 billion in global ad revenue next year and grow 19.6% each year through 2016 to then reach $11.4 billion. Mobile ad spending will amount to $6.6 billion by then, he predicts.
TV will continue to grow in stature, the ad forecasters expect. "Despite many predictions to the contrary, television has been the stand-out success of the last five years among traditional media," Zenith said.
The firm sees the global share of TV ad dollars rise from 40.7% this year to 41.8% by 2013. And Wieser predicts average growth in TV spending of 7.5% through 2016.