According to the latest European Advertising & Media Forecast published Friday by WARC, the outlook for the advertising business has darkened over the last quarter. The latest prognosis is a real-terms decline in Europe as a whole, the first since 1993.
A combination of the cyclical economic slowdown and the shock of the terrorist attacks on the USA have considerably worsened the short-term prospects of the advertising industry, and those of the global economy as a whole. At the time of writing the severity and duration of the economic downturn remains uncertain.
Many of the economies covered in this report began to falter this year, and now face an even more difficult fourth quarter as a result of the September 11 atrocities. Consumer and business confidence were immediately hit by the tragedy.
The US economy is now widely accepted to be in recession, with opinion divided on the timing of the recovery. Economists are generally expecting a decline in output in the last quarter of this year and the first two quarters of 2002, with GDP growth returning positive in the second half of next year.
In Europe, some countries have less gloomy economic outlooks, and most commentators expect Eurozone growth to outpace that of the US. Of the major European economies, the UK is perhaps the best placed to overcome the present difficulties and continue to grow, albeit at a slower rate.
Elsewhere, the Japanese economy remains in dire straits and is unlikely to recover until exports are boosted by a US economic upturn.
The US advertising industry is facing an exceptionally difficult year. An already soft advertising market has been further hit by the events of September 11. The attacks had an immediate and direct effect on advertising by reducing the supply of advertising space as broadcasters and newspaper owners dropped advertising in favour of news coverage. Advertisers also cut ad campaigns where these were felt to be inappropriate. This will put a significant dent in ad revenues for September, and almost certainly the rest of the year as well.
Most European markets are also experiencing tough conditions. Of the 19 European markets covered by the Forecast, 12 are currently expected to see a real-terms decline in advertising expenditure in 2001, including the ‘Big 5’ of UK, France, Germany, Italy and Spain. The worst-hit European market in 2001 is expected to be Sweden, where preliminary figures, even before September 11, indicate a significant fall in advertising expenditure.
Looking ahead to 2002, although the global economic situation is expected to become slightly more favourable from mid-year, advertising markets are expected to recover only slowly, at best.
The US may experience a further, but less severe, real-terms decline in 2002. Of the top five European markets, very limited recovery is currently expected in the UK, France and Italy but Germany and Spain are expected to see a further real-terms decline. The strongest growth is likely to come from the smaller markets: Ireland, Poland and the Czech Republic.
European television is facing significant losses in share this year, and across Europe as whole is expected to attract 6 per cent less revenue in real terms than in 2000. In 2002, TV’s share is expected to recover slightly, although it is likely to remain below its 2000 level. Newspapers and radio are also likely to see real declines in adspend in 2001 of around 3–4 per cent, but with a less dramatic effect on share.
The biggest gain in share over the forecast period is likely to be made by outdoor, which continues to perform well in most markets.
News source: WARC European Advertising & Media Forecast