ZenithOptimedia has estimated that global ad expenditure will grow 4.9% by the end of 2010 (up very slightly from their 4.8% prediction in October). Ad expenditure has recovered more rapidly than expected in every region this year, as advertisers regained some of their confidence after an alarming 2009.
“The key result of this update is the continued rise of developing markets and digital media, and their central role in driving global growth,” said Steve King, ZenithOptimedia’s worldwide CEO.
“In fact the importance of the internet is underrepresented in these figures. Advertisers are investing a lot more in owned and earned media, where their activities do not count as ad expenditure in the traditional sense,” King added.
Corporate profitability , according to ZenithOptimedia ,has rebounded, and many companies have built up large reserves of cash, leaving them in a much more secure position to invest for the future.
ZenithOptimedia forecasts the recovery in ad expenditure to continue at a steady pace over the next three years, with 4.6% growth in 2011 and 5.2% growth in both 2012 and 2013. There are certainly risks to the recovery, notably high debt in the developed world (both private and public), persistent unemployment in the US, fears of defaults in the Eurozone, and cuts in government spending. 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%.
In recent years there has been a big difference between the growth rates of developed and developing markets, and we expect this to continue, caused by the much stronger economic growth of the developing markets. Between 2010 and 2013 we forecast Japan to grow by 5%, North America to grow by 9% and Western Europe to grow by 10%. Meanwhile we forecast Latin America to grow by 26%, Central & Eastern Europe by 31%, Asia Pacific by 23%, and Asia Pacific excluding Japan to grow by 36%. The rest of the world (primarily Middle East and Africa) will grow by 24%. Developing markets – which we here define as everywhere outside North America, Western Europe and Japan – will increase their share of the global ad market from 31.5% in 2010 to 35.9% in 2013.
The world’s current top ten ad markets divide into four broad groups. Japan – as mentioned earlier – is forecast to grow only 5% between 2010 and 2013, dragged down by deflation and huge public debt. The US and the big markets in Western Europe (France, Germany, Italy and the UK) are forecast to grow a disappointing 7% to 9% over the period, held back by concerns over debt, unemployment and government spending. Australia and Canada did well during the downturn, thanks partly to strong trade links with Asia Pacific, and will grow a much more substantial 15% to 17%. The ‘emerging’ markets of Brazil and China will grow 31% and 51% respectively.
Its rapid growth means China will overtake Germany to become the world’s third-largest ad market in 2011, and stay at that position throughout our forecast period. China is currently just over half (52%) the size of Japan, the second-largest ad market, and will be three-quarters (76%) of its size in 2013. Russia will enter the top ten in 2012, leapfrogging Australia and Canada to take ninth place, and then overtake Italy to take eighth in 2013.
Now that it has returned to growth, its sheer size means that the US will contribute the most new ad dollars to the global market between 2010 and 2013 (US$13.3 billion), despite its slow growth. However, the next five largest contributors are all developing markets: China (which contributes almost as much as the US, at US$11.6 billion), Russia (US$4.4 billion), Brazil (US$4.4 billion), Indonesia (US$2.7 billion) and India (US$2.5 billion).
Looking at their growth between 2010 and 2013, the media can be divided into four groups. Newspapers and magazines are forecast to decline by 2% between 2010 and 2013 as circulations continue to fall and readers migrate to the internet. Radio is forecast to grow by 10% – behind the market as a whole, which will grow by 16%. Outdoor will outperform the markets with 18% growth, television and cinema with 19% each. These three media have benefited from technological improvements that have encouraged more consumption (such as HDTV and 3D movies) and increased their visibility and impact (such as digital outdoor displays). Meanwhile the internet will continue to grow much faster than the traditional media with 48% growth over the period.
Despite many predictions to the contrary, television has been the stand-out success of the last five years among traditional media. Bigger and higher-quality displays, more channels delivered by digital television, and the convenience of PVRs mean people are watching more television than ever. Television’s share of the ad market has increased from 37.1% in 2005 to 40.7% in 2010, and will rise to 41.8% in 2013.
The internet is still rapidly increasing its market share, which will rise from 14.0% this year to 17.9% in 2013. Display advertising’s share of internet ad expenditure fell from 36.2% in 2006 to 33.6% in 2009, but the rise of internet video and social media have reversed that trend. We forecast display to take 33.9% of internet adspend this year, and 35.0% in 2013.
The importance of the internet to advertisers is understated by these figures, because as well as creating new opportunities in paid media, it has greatly expanded brands’ abilities to talk to consumers via social media, both ‘owned’ (on brands’ own websites and microsites, YouTube channels, Twitter and Facebook accounts and so on) and ‘earned’ (conversations consumers have on forums, blogs, etc). These activities can be extremely effective, and many advertisers have embraced them enthusiastically, but most of them will never be picked up in a survey of ad expenditure.