Mumbai: It is now clear that the ad market is in the middle of a sharp downturn that began in Q3 2008 and accelerated in Q4. ZenithOptimedia has reduced its forecast for ad-spend growth in 2009 from 4% to 0.2% as the fallout from the financial crisis has spread throughout the real economies of the developed world.
Consumer and corporate confidence has been severely shaken, and the economic outlook is uncertain. The best-informed economic experts are arguing about exactly what has gone wrong, how bad it will get and what should be done about it. Because of the general economic volatility there is greater degree of uncertainty than usual to our forecasts, and we are keeping them under monthly rather than quarterly review.
The US is now officially in recession, as are several countries in western Europe, while others are almost certainly headed that way. As usual, ad markets in these regions have reacted to recession by shrinking even more quickly than the wider economy. ZenithOptimedia now expect ad expenditure to decline 5.7% in North America in 2009, and 1% in western Europe.
These are well down from their previous forecasts of 0.9% growth and 2.6% growth respectively, which we published just two months ago.
The credit crisis has also slowed the advance of some developing markets, particularly in Asia Pacific and central and eastern Europe. ZenithOptimedia have reduced their forecasts for ad expenditure growth in 2009 from 5.2% to 3.2% in Asia Pacific, and from 12.7% to just 1.5% in Central & Eastern Europe amid fears about the economic stability of markets like Hungary, Turkey and Ukraine.
Elsewhere our forecasts remain healthy, and we still expect 14.9% growth in Latin America, and 11.2% growth in the rest of the world. Among the big emerging ‘BRIC’ markets we forecast continued growth in 2009, from 5% for Russia, through 9% in China and 13% in India, to 30% in Brazil.
The global ad market will be very tough in Q1 2009, and Q2 is unlikely to be much better. But we expect mild recovery to begin in Q3, a year after the start of the downturn, and pick up in Q4 when the year-on-year comparatives will start to get a lot easier. Over the course of 2010 we forecast global ad expenditure to grow 5.5%, followed by 5.8% growth in 2011. We expect the sharp disparity of growth rates between the developed world (which we define as North America, Western Europe and Japan) and the developing world (which is defined as everywhere else) to continue. We estimate developing markets will contribute 89% of all ad expenditure growth between 2008 and 2011, and increase their share of the global ad market from 30% to 36% over this period.
Internet advertising continues to grow rapidly as advertisers turn to it for its innovation and accountability, which is particularly important in a recession when every line of a budget must be justified.ZeithOptimedia still expect internet advertising to grow by 18% in 2009, including 18% growth in North America and 12% in western Europe. They forecast the internet to take a 15.6% share of global ad expenditure in 2011, 5.2 percentage points ahead of magazines and 5.6 points behind newspapers, having narrowed the gap from 15.1 points in 2008.
The other media they expect to undergo substantial growth in 2009 are cinema and outdoor. Cinema is still a new medium for advertising in the US, and is growing strongly there, and admissions often rise in times of economic difficulty as consumers seek a means of escape. Outdoor contractors are investing in both traditional displays and digital billboards that capture the attention of consumers and advertisers.
Television is also doing relatively well in the downturn. As happened in the previous two downturns (in 1991-1992 and 2001-2002) advertisers will continue to shift their expenditure from secondary media to television, being familiar with its power to build brands. Like cinema admissions, television viewing tends to rise in recessions because it offers escapism, and at a much lower price per hour to the consumer. The rise of the developing ad markets—where television tends to account for a much higher share of expenditure than in the developed markets—is also boosting the global profile of television, which ZenithOptimedia expect to attract a record 38.5% share of global ad expenditure in 2010 and 2011.