UK media investment growth has, with the USA, lagged its western peer group since 2005 and is now one of the first into ad recession. It is looking deep already, with only the USA currently expected to shed more ad dollars in 2009. This has been a classic, hard-to-predict ‘trend reversal’ from our own springtime hopes of 3% UK media growth next year, with sentiment falling fastest alongside the grim September/October newsflow.
Every medium is affected, and indeed nearly every country including the fast-growing BRIC/Next 11 as our forthcoming global forecast will show (December 8th).Since 2005 total UK media investment has been substantially supported by extraordinary growth in all forms of internet advertising – paid search, display and classified. As internet grows to become the largest advertising channel – which we still expect will occur in 2009 – it was inevitable that the growth rate would slow. The moment seems to have arrived. We have reduced our forecast of headline UK internet growth (all types) from 27% in our May forecast to 22% in 2008, and more dramatically from 20% to 4% for 2009. Demand for paid search and online display is still good, but paid search growth has been slowing markedly across 2008 and display is subject to price deflation as more activity becomes cost-per-action or ‘performance’-based.
Premium display inventory (pre-roll, high-quality publishers and portals; cost-perthousand-based rather than cost-per-action), typically used by larger brand advertisers, remains in good demand but advertiser arbitrage between per-thousand and per-action chains their respective pricing.
Sudden recovery is always possible but consumer retrenchment is simply too deep to make this likely in 2009. But some conditions are already improving. The monetary and fiscal taps are at least open, even if the flow is sluggish. Raw materials prices have fallen and for packaged-goods advertisers in particular this frees up cash which could be returned to marketing. Brands which were strong enough to raise prices when commodities spiked are even better-placed. Most of all, the strategy-minded advertiser knows recessions are a rare and brief opportunity to build share at bargain prices.
This Year Next Year is GroupM’s media and marketing forecasting series drawn from WPP’s worldwide resources in advertising, public relations, market research and specialist communications. GroupM is the leading global media investment management operation. It serves as the parent company to WPP media agencies including MAXUS, MediaCom, Mediaedge:cia and Mindshare.