ZenithOptimedia unveils Ad Expenditure Forecasts; says Internet will overtake magazines by 2010
ZenithOptimedia has released its first Advertising Expenditure Forecasts to 2010. The agency has predicted global ad expenditure to grow by 6.7 per cent in 2008. This figure is 5.3 per cent above this year, and the rise is credited to the Olympic Games, elections in the US, and European football tournament. Also in 2010, the Internet is likely to overtake magazines to become the world’s third-largest advertising medium.
ZenithOptimedia has released its first Advertising Expenditure Forecasts to 2010. The findings reveal that the global ad market will accelerate in 2008 despite credit squeeze. The agency has predicted global ad expenditure to grow by 6.7 per cent in 2008. This figure is 5.3 per cent above this year, and the rise is credited to the Olympic Games, elections in the US, and European football tournament.
The forecasts reveal that the developing markets have taken over as the main contributors to global growth, compensating for slow growth in developed markets. ZenithOptimedia predicts that by 2010, China will be the fourth-largest advertising market, and Russia will be sixth. Between 2007 and 2010, Internet ad spend will grow by 69 per cent and raise its market share from 8.1 per cent to 11.5 per cent. Also in 2010, the Internet is likely to overtake magazines to become the world’s third-largest advertising medium.
In terms of the advertising expenditure by region, which includes major media like newspapers, magazines, television, radio, cinema, outdoor and the Internet, the Asia Pacific expenditure in 2007 was $94,222 million, while in 2010, it will go up to $116,570.
While the credit squeeze is dampening economic growth around the world, ZenithOptimedia foresees that ad market will not follow suit for several reasons. Unlike in the periods leading up to the last two ad recessions, advertisers have not been increasing their budgets faster than warranted by economic growth. Instead, over the last few years, ad expenditure has roughly tracked the economy, and has remained at 0.92-0.93 per cent of GDP. Before the last two recessions, this proportion increased rapidly and peaked at 1.08 per cent in 1989 and 1.06 per cent in 2000.
The last ad recession also followed a period of heavy, one-off expenditure by dotcom and telecoms companies; convinced that all they needed to do was establish their brands, and profits would inevitably follow. These companies spent their investment capital on advertising instead of building up their business, and
when the inevitable crash came, that money disappeared for good. There are now a lot of dotcom start-ups seeking investment capital again, leading some to worry whether this is another bubble. If it is, it won’t have the same effect on the ad market. Most of them are basing their business model on selling advertising: instead of adding demand for advertising space, they are increasing its supply.
The housing downturn and credit squeeze will certainly hit property and finance advertising in advanced economies like the US. But the ad market will be boosted by $6 billion in spending from the ‘quadrennial events’ in 2008: $3 billion from the Olympics, $2 billion from the Presidential and congressional elections in the US, and $1 billion from the European football tournament, Euro 2008. The quadrennial accounts for almost all of the acceleration in 2008: without it, growth would remain flat at 5.4 per cent. But perhaps most significantly, weakness in developed markets no longer guarantees a global downturn, since developing markets have taken over as the biggest contributors to ad spend growth.
Between 2007 and 2010, ZenithOptimedia forecast that developing markets would add an extra $49.5 billion to the world ad market, while the developed markets would add $37.5 billion. Developing markets contributed 26 per cent of global ad spend in 2007, and is expected to contribute 31 per cent in 2010.
Many of the fastest-growing countries are essentially new advertising markets, where ad spends is growing from a very low base. In 2010, ZenithOptimedia expected China to overtake Germany to become the fourth-largest ad market.
The
ten fastest-growing ad markets Growth in adspend (%) 2010 v/s 2007 |
|
| Kazakhstan | 155.2 |
| Belarus | 101.8 |
| Serbia | 101.1 |
| Egypt | 100.1 |
| Russia | 90.2 |
| Moldova | 89.6 |
| Indonesia | 85.4 |
| United Arab Emirates | 84.6 |
| Ukraine | 77.8 |
| Pan Arab | 75.0 |
Source: ZenithOptimedia
The predictions in the Internet space will nearly double its share of global ad spend between 2006 and 2010, at the expense of most of other media. All media are growing, but apart from the Internet, only cinema and outdoor will gain share over this period. Internet advertising will be worth $36 billion this year – $5 billion more than ZenithOptimedia had predicted in December 2006. The company forecasts it to grow by 24 per cent in 2008 and 69 per cent over the next three years, reaching $61 billion in 2010.
Share
of total ad spend by medium 2006-2010 (%) |
|||||
| 2006 | 2007 | 2008 | 2009 | 2010 | |
| Newspapers | 29.0 | 27.8 | 26.8 | 26.1 | 25.4 |
| Magazines | 12.5 | 12.2 | 11.9 | 11.7 | 11.4 |
| Television | 37.8 | 37.7 | 37.9 | 37.7 | 37.5 |
| Radio | 8.3 | 8.2 | 7.9 | 7.9 | 7.7 |
| Cinema | 0.4 | 0.4 | 0.5 | 0.5 | 0.5 |
| Outdoor | 5.5 | 5.6 | 5.7 | 5.8 | 5.9 |
| Internet | 6.4 | 8.1 | 9.4 | 10.4 | 11.5 |
The study also forecasts traditional media to grow 5 per cent and 14 per cent respectively over the same periods, of 2008 and 2010. Internet advertising will pass three milestones over the next three years: it is expected to overtake radio advertising in 2008, attain a double-digit share of global advertising in 2009, and overtake magazine advertising in 2010, with 11.5 per cent of total ad spend. Even then there would remain plenty of scope for further growth.
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