Prospects mixed for ad market

07 July 2011

LONDON: Advertising markets including China and the US should enjoy strong growth this year, but recent events in Japan and the Middle East mean the global picture is more complex.

GroupM, WPP Group's media arm, has revised down its annual forecast from a 5.8% improvement to a 4.8% jump, at current prices.

This was mainly due to the natural disasters hitting Japan and political unrest in the Middle East.

Overall, worldwide expenditure is set to stand at $506bn in 2011, compared with $483bn in 2010.

More specifically, projections for Japan were amended from a 3% lift, as anticipated last December, to a 5% contraction, a difference of $4bn.

"It's highly unusual for natural disasters to measurably impact the totality of global advertising," Adam Smith, GroupM's futures director, said.

"However, the earthquake and subsequent tsunami in Japan was of this rare scale."

Similarly, the Middle East and Africa is predicted to see a 2.5% improvement, to $16.5bn, halving the acceleration secured during 2010, and effectively costing the industry $1.2bn.

"We further expect its potential annual growth rate to be reduced to around 7% annually for a few years instead of its typically exuberant double-digit performance," Smith said.

As such, the Middle East and Africa is now pegged to deliver revenues of $17.7bn next year.

Elsewhere, China is likely to witness an 11.9% expansion in 2011, coming in at $52.8bn, and a 14.6% surge in 2012, attaining $61.7bn.

Positive trends are at work across Asia Pacific as a whole, as expenditure rises by 6.2% this year, recording $157bn, followed up by a 10.3% improvement, to $173bn, in 2012.

Latin America will register double-digit increases in both years, growing from $33.4bn to $38bn as a consequence.

Equally, Central and Eastern Europe is in line to experience leaps topping 12% in 2011 and 2012, as totals reach $24.8bn, measured against a starting position of $21.9bn.

The US is also expected to post expansions of exactly 4% this year and next, yielding $162bn in 2011 and $168bn in 2012.

"Without the election, US ad growth in 2012 would probably be slower than what we are predicting for 2011," Rino Scanzoni, GroupM's chief investment officer, said.

"The elections make heavy use of local TV and radio, so national media may well find 2012 is slower-going in any case."

GroupM valued the worldwide advertising market at $540bn in 2012, aided by the 2012 Olympic and US political contests.

It added that digital will take 17% of ad budgets in 2011, a full percentage point ahead of its previous estimate from December 2010.

New media advertising has recently logged increases in the 15% to 16% range per year, and should generate over $100bn in 2012.

"Digital advertising spending accounts for 20% and more of measured advertising in countries where it is most developed, but it still has real growth potential even in those nations," Smith said.

"A recurring theme from such countries is the commercial utility of behavioral targeting and web video, even among traditional 'brand' or 'awareness' advertisers."

Data sourced from GroupM; additional content by Warc staff