GroupM: Ad slump to last into 2010

Study predicts next year's decline to be worse than in 2009

Those hoping for a turnaround in the U.S. ad economy next year could be sorely disappointed, according to a new forecast from WPP's GroupM. What's worse, the new research predicts that outlays in 2010 will decline even more than they will this year.

The new study revises downward spending predictions the holding company made in December 2008. GroupM said it now expects U.S. spending this year to fall by 4.3% in 2009 to approximately $155 billion (versus the 3% drop predicted in December) and tumble another 6.8% to about $144.5 billion next year.

Global ad spending in measured media is expected to drop 4.4% to $425 billion in 2009 compared to 2008 when spending was up 3%, according to the revised GroupM forecast. In December, GroupM has predicted worldwide spending this year to be basically flat at $458 million.

GroupM chief investment officer Rino Scanzoni cautioned that 2010 was expected to show a more severe decline as a result of marketing budgets being devised in the throes of the current recession. He also said the stimulus package provided by the U.S. government is not expected to have an immediate positive impact on advertising because it does little to drive consumer spending in the face of high unemployment, a weak housing sector and a resurgence of commodity inflation in the short run.

"Any optimism we feel about the U.S. this year is expected to be mitigated by a further spending decrease in 2010," Scanzoni said.

WPP claims that it is the largest single buyer of media in the world and that its predictions are based on its proprietary revenue database across measured media.

GroupM Futures director and chief forecaster Adam Smith said that when adjusted for consumer price inflation, the global 4.4% drop equates to a fall in real terms of 7%, which follows a drop (also in real terms) of 1.6% in 2008 global advertising. "The 2008-2009 period is now a more serious advertising recession in scale, duration and relative to the global economy than the extraordinary 5.1% real-terms post-dot-com global advertising correction of 2001," Smith said.

GroupM's revised forecast predicts a 6.7% drop in spending in Western Europe in 2009, versus a 1% drop last year.

And spending growth in China is slowing dramatically. The revised GroupM forecast now pegs spending growth in that country at 3.2% this year, sharply down from the 13% gain that it forecast in December. The growth decline there is attributed to consumer retrenchment and a credit crunch in retail distribution.

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