Monday 11 April 2011

ZenithOptimedia releases new ad forecasts: Underlying ad recovery continues despite shocks in Japan and the Middle East

  • This year’s growth revised down from 4.6% to 4.2% after the turmoil in Middle East and the earthquake in Japan
  • Our first estimate is that these one-off events have knocked about US$2.4 billion off this year’s global ad expenditure
  • The underlying recovery remains healthy, though, and we have upgraded our forecast for 2012 from 5.2% to 5.8%
  • Developing markets to increase their share of global ad expenditure from 30.9% in 2010 to 35.1% in 2013
  • Internet to become the world’s second-largest advertising medium in 2013, overtaking newspapers

ZenithOptimedia now forecasts global ad expenditure to grow by 4.2% in 2011, down from the 4.6% we forecast in December, as a result of the political turmoil in the Middle East and the devastating earthquake in Japan. These events had immediate consequences for advertising in the affected markets. In Egypt – by far the largest ad market to be caught up in the Middle Eastern uprisings – there was almost no advertising on television during the revolution, and in the aftermath advertisers have been very careful about the content and placement of their messages. In Japan broadcasters replaced almost all commercial ad slots with public-service announcements for weeks after the earthquake, and blackouts and distribution problems will hinder media consumption for months to come. We do not expect these shocks to derail the global recovery in the long term, however. We expect some of the missing advertising to reappear later in the year, followed by strong growth in these markets in 2012 thanks to the easy comparison with the first quarter of this year. Japan is forecast to shrink 4.1% this year then grow 4.6% next year, while Egypt follows this year’s 20.0% drop with 12.1% recovery in 2012.

Overall we predict 5.8% growth in global ad expenditure in 2012, up from our prediction of 5.2% growth last December. This is partly the result of the rebound in Japan and the Middle East, and partly thanks to further strengthening in Western and Central & Eastern Europe, where advertisers are becoming more confident of the long-term economic prospects.

The large disparity in growth rates between developed and developing markets continues. We forecast North America to grow by an average of 3.1% a year between 2010 and 2013 and Western Europe to grow by 3.5%. We expect Japan to grow just 0.7% a year, though this obscures the big drop in 2011 followed by the recovery of lost ground over the next two years. We forecast 0.1% annual growth in the Middle East, as advertisers tread carefully amid political instability. Meanwhile we forecast Latin America to grow by 8.2% a year, Central & Eastern Europe by 12.4%, Asia Pacific by 6.6%, and Asia Pacific excluding Japan to grow by 10.2%. 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 30.9% in 2010 to 35.1% in 2013.

There are now two ‘developing’ markets in the world’s top ten ad markets, and there will be three in 2013. China (which we forecast to grow at an average 13.6% a year to 2013) will overtake Germany (where we forecast 2.4% annual growth) 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 (54%) the size of Japan, the second-largest ad market, and will be just over three-quarters (77%) of its size in 2013. Brazil (with 15.4% annual growth) will overtake France (with 2.9%) to take sixth place in 2011. Russia (23.3% growth) will rise from 12th place in 2010 to tenth in 2011, eighth in 2012, and then seventh in 2013.

Top ten ad markets

US$ million, current prices. Currency conversion at 2009 average rates.


2010

Adspend


2013

Adspend

1

USA

151,519

1

USA

165,903

2

Japan

43,297

2

Japan

44,173

3

Germany

24,535

3

China

33,999

4

China

23,208

4

Germany

26,361

5

UK

18,042

5

UK

19,970

6

France

13,181

6

Brazil

16,268

7

Brazil

12,950

7

Russia

14,751

8

Italy

10,801

8

France

14,362

9

Australia

9,705

9

Italy

11,738

10

Canada

8,891

10

Australia

11,167

Source: ZenithOptimedia

The sheer size of the US – 3.5 times the next-largest market - means it will contribute the most new ad dollars to the global market over the next three years (US$14.2 billion), despite its slow growth. However, the next five largest contributors are all developing markets: China (which contributes almost as much as the US, US$10.8 billion), Russia (US$6.9 billion), Brazil (US$3.3 billion), India (US$2.5 billion) and Indonesia (US$2.4 billion). Overall we predict developing markets will contribute 62% of new ad dollars over the next three years.

The ten largest contributors to global adspend growth (2013 v 2010)

US$ million, current prices. Currency conversion at 2009 average rates.



Adspend growth

1

USA

14,238

2

China

10,791

3

Russia

6,880

4

Brazil

3,318

5

India

2,493

6

Indonesia

2,422

7

UK

1,928

8

Germany

1,826

9

South Africa

1,552

10

Australia

1,462

Source: ZenithOptimedia

Advertising expenditure by region

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

US$ million, current prices. Currency conversion at 2009 average rates.


2009

2010

2011

2012

2013

North America

156,556

160,556

164,768

170,475

176,118







Western Europe

100,327

105,392

109,094

113,116

116,926







Asia/Pacific

100,129

107,863

112,877

122,216

130,511







Central & Eastern Europe

26,801

28,488

31,332

35,519

40,423







Latin America

25,331

29,140

31,445

33,864

36,909







Middle East & North Africa

10,618

11,156

11,166

11,703

12,354







Rest of world

8,658

9,348

10,147

11,169

12,347







World

428,421

451,943

470,829

498,062

525,587

Source: ZenithOptimedia

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

Year-on-year change (%)


2009 v 08

2010 v 09

2011 v 10

2012 v 11

2013 v 12

North America

-12.6

2.6

2.6

3.5

3.3

of which USA

-12.9

2.3

2.5

3.4

3.2







Western Europe

-11.0

5.0

3.5

3.7

3.4







Asia Pacific

-5.9

7.7

4.6

8.3

6.8

excluding Japan

-0.5

13.8

10.5

10.4

9.6







Central & Eastern Europe

-18.1

6.3

10.0

13.4

13.8







Latin America

2.1

15.0

7.9

7.7

9.0







Middle East & North Africa

8.9

5.1

0.1

4.8

5.6







Rest of world

5.5

8.0

8.6

10.1

10.5







World

-9.6

5.5

4.2

5.8

5.5

Source: ZenithOptimedia

Global advertising expenditure by medium

We now predict that the internet will overtake newspapers to become the world’s second-largest advertising medium in 2013. While we have long expected this to happen in the near future, this is the first time this event has fallen within our forecast period. Newspaper ad expenditure was still 51% larger than internet ad expenditure in 2010, but newspaper expenditure is shrinking by 1.4% a year, as circulations continue to fall in developed markets, and readers migrate to the internet. Meanwhile internet advertising continues to grow at breakneck pace, at a forecast average rate of 14.4% a year between 2010 and 2013. We forecast newspaper ad expenditure to fall from US$95.2 billion in 2010 to US$91.2 billion in 2013, while internet ad expenditure rises from US$63.0 billion to US$94.5 billion over the same period.

This year display advertising has taken over from search as the main driver of internet ad growth. Display, broadly defined here to include online video and social media, has been invigorated by these fast-growing segments. Affordable, do-it-yourself tools to create streaming video ads have opened online video to small and local advertisers. Social media sites now attract huge audiences, though click-through rates and therefore costs are often very low. We expect global display ad expenditure to grow at an average of 16.4% a year to 2013, while paid search grows by 12.8% and classified by 10.2%.

Television remains by far the largest medium and is continuing to increase its market share. Television attracted 40.4% of global ad expenditure in 2010, up from 37.3% five years earlier, and we expect it to attract 41.7% in 2013. Bigger and higher-quality displays, more channels delivered by digital television, and the convenience of PVRs mean people are watching more television than ever. We forecast television ad expenditure to rise from US$180.3 billion in 2010 to US$216.0 billion in 2013.

Advertising expenditure by medium

US$ million, current prices Currency conversion at 2009 average rates.


2009

2010

2011

2012

2013

Newspapers

97,421

95,235

92,997

91,867

91,246

Magazines

43,856

43,768

43,246

43,007

42,835

Television

165,502

180,315

190,169

203,698

215,980

Radio

31,672

31,995

32,828

34,077

35,243

Cinema

2,091

2,308

2,451

2,606

2,764

Outdoor

28,184

29,456

31,172

33,306

34,946

Internet

54,230

63,049

71,623

82,358

94,467

Total *

422,956

446,126

464,486

490,920

517,481

Source: ZenithOptimedia

* The totals here are lower than the totals in the ‘Advertising expenditure by region’ table above, since that table includes total adspend figures for a few countries for which spend is not itemised by medium.

Share of total adspend by medium (%)


2009

2010

2011

2012

2013

Newspapers

23.0

21.3

20.0

18.7

17.6

Magazines

10.4

9.8

9.3

8.8

8.3

Television

39.1

40.4

40.9

41.5

41.7

Radio

7.5

7.2

7.1

6.9

6.8

Cinema

0.5

0.5

0.5

0.5

0.5

Outdoor

6.7

6.6

6.7

6.8

6.8

Internet

12.8

14.1

15.4

16.8

18.3

Internet advertising by type

US$ million, current prices Currency conversion at 2009 average rates.


2009

2010

2011

2012

2013

Display

18,230

21,435

24,958

29,184

34,126

Classified

9,773

10,554

11,630

12,706

13,832

Paid search

26,227

31,059

35,035

40,468

46,509

Total

54,230

63,049

71,623

82,358

94,467

Source: ZenithOptimedia

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