ZenithOptimedia releases September 2012 advertising expenditure forecasts

Global advertising to grow 4.6% in 2013, led by developing markets and digital media

  • Global ad expenditure growth forecast to strengthen over the next two years, rising from 3.8% in 2012 to 4.6% in 2013 and 5.2% in 2014
  • Developing markets to grow by 8% in 2013, and internet advertising by 15%
  • Eurozone ad expenditure to return to slow growth in 2013 after decline in 2012
  • The US to contribute 29% of adspend growth between 2011 and 2014
  • Developing markets to contribute 59% of adspend growth between 2011 and 2014, and increase their share of global adspend from 33% to 36%
  • Internet’s share of expenditure to rise from 16.0% in 2011 to 21.4% in 2014, exceeding 30% in seven markets
  • European football championship, Olympics and US elections to help television attract a record 40.4% of global adspend in 2012

ZenithOptimedia predicts global ad expenditure will grow 4.6% in 2013, reaching US$525 billion by the end of the year. As has been the case since the economic downturn began in 2007, this growth will be led by developing markets, which we forecast to grow by 8% on average in 2013. We expect Central & Eastern Europe to bounce back after a tough 2012 with 7.4% growth in 2013, while Asia Pacific (excluding Japan) grows by 8.2%, and Latin America grows by 10.1%.

North America has had a particularly strong 2012 thanks to record Olympic audiences and heavier than expected political advertising in the US. Despite the tough comparison, we still expect solid 3.6% growth from North America in 2013.

Digital media – particularly internet advertising – are supplying most of the growth in spend by medium. We forecast internet advertising to grow by 15.1% in 2013, while traditional media grow by 2.3%.

 We have reduced our forecast for global growth in 2012 to 3.8%, from the 4.3% we published in June. Advertisers have cut spending in the eurozone in response to further economic weakness, and we now expect eurozone spend to shrink 3.1% over the course of this year, compared to the 1.1% decline we forecast in June. Now that advertisers have recalibrated their expectations for future growth in the region, we expect budgets to resume slow 0.9% growth in 2013, strengthening to 2.3% in 2014, assuming the eurozone remains intact.

 “Advertisers are broadly continuing to invest, despite the global economic concerns and issues,” says Steve King, Global Chief Executive Officer for ZenithOptimedia Group. “However, they are seeking to ensure that any expenditures are delivering strong return on investment. The US continues to deliver solid growth. This, combined with the growth in developing markets and in digital media, has helped mitigate the drop in eurozone spending.”

Advertising expenditure by region

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)
US$ million, current prices. Currency conversion at 2011 average rates.

 

2010

2011

2012

2013

2014

North America

162,165

165,104

172,039

178,313

186,344

           
Western Europe

106,344

108,688

107,885

109,668

112,642

           
Asia/Pacific

125,059

132,172

140,383

148,423

157,155

           
Central & Eastern Europe

24,181

26,151

26,631

28,592

31,089

           
Latin America

31,996

35,344

38,080

41,935

45,600

           
Middle East & North Africa

4,881

4,155

4,198

4,313

4,412

           
Rest of world

10,940

11,592

12,321

13,468

14,812

           
World

465,566

483,206

501,536

524,712

552,054

Source: ZenithOptimedia

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

Year-on-year change (%)

 

2010 v 09

2011 v 10

2012 v 11

2013 v 12

2014 v 13

North America

2.7

1.8

4.2

3.6

4.5

of which USA

2.3

1.6

4.3

3.6

4.4

           
Western Europe

5.4

2.2

-0.7

1.7

2.7

           
Asia Pacific

10.6

5.7

6.2

5.7

5.9

excluding Japan

19.4

10.7

8.0

8.2

8.5

           
Central & Eastern Europe

9.3

8.1

1.8

7.4

8.7

           
Latin America

18.5

10.5

7.7

10.1

8.7

           
Middle East & North Africa

7.7

-14.9

1.0

2.8

2.3

           
Rest of world

16.2

6.0

6.3

9.3

10.0

           
World

7.0

3.8

3.8

4.6

5.2

Source: ZenithOptimedia

Uncertainty over the future of the eurozone has weighed on the global economy since we published our last forecast in June. The eurozone as a whole has slipped from stagnation to probable recession; other markets in Europe have weakened; and many developing markets have slowed as their exports to the developed world have fallen off, although their growth generally remains much firmer than in developed markets. Nevertheless, we still forecast recovery in ad expenditure growth over the next two years. We expect sustained and strong growth in Asia Pacific and Latin America, rapid recovery in Central & Eastern Europe, slower but substantial growth in North America, and slow improvement in Western Europe.

The eurozone is probably now in a recession under the technical definition (two consecutive quarters of GDP decline) after a 0.3% decline in GDP in Q2. Its economy is clearly in serious trouble, with deep recessions and painful unemployment in markets like Italy, Spain, Portugal, and of course Greece. In these markets we expect ad expenditure to fall sharply this year, by between 6.5% (in Italy) and 33.2% (Greece). By 2011 the Greek ad market had already shrunk by 44% from its peak level in 2007; by the end of this year we expect it to be 63% below its peak level. Some of the central markets (such as Austria and Germany) have managed to achieve some nominal growth this year, although at less than the rate of inflation. Overall we forecast ad expenditure to decline 3.1% in the eurozone in 2012.

Adspend growth in the eurozone (key markets, 2012)

 

Adspend growth (%)

Austria

+1.3

Belgium

+0.1

Finland

-2.3

France

-0.9

Germany

+1.1

Greece

-33.2

Ireland

+0.1

Italy

-6.5

Netherlands

-1.2

Portugal

-13.0

Spain

-12.2

Source: ZenithOptimedia

The European Central Bank’s plan to buy bonds as necessary to reduce the borrowing for member countries has bought some time, but the EU needs to put a long-term solution in place before the crisis can be declared over. Our forecasts assume that the eurozone avoids economic disaster (such as a break-up of the euro) this year, followed by slow but steady economic improvement. On this basis we predict eurozone adspend will grow 0.9% in 2013 and 2.3% in 2014.

The eurozone is weighing down our predictions for Europe as a whole. Since June we have reduced our 2012 forecast for Western Europe from 0.4% growth to -0.7%, and our forecast for Central & Eastern Europe from 6.2% growth to just 1.8%%. We expect Western Europe’s recovery to be a slow one, with 1.7% growth in 2013 and 2.7% in 2014. Central & Eastern Europe, however, should bounce back rapidly with 7.4% growth in 2013, led by Russia, where we forecast ad expenditure to accelerate from 13.0% in 2012 to 14.5% in 2013. Russia is by some distance the largest ad market in Central & Eastern Europe, accounting for 36% of the region’s ad expenditure in 2012, a proportion we expect to rise to 41% by 2014.

The advertising recovery remains robust in North America, which we have upgraded from 3.6% growth in 2012 to 4.2%. North America has been boosted this year by the very strong performance of the Olympics in the US, where ratings were 30% higher than expected. 41 million viewers watched the opening ceremony, making it the most-watched Summer Olympics opening ceremony in US history. Political advertising in the run-up to the November elections has also been much stronger than forecast. Political spending on spot TV is currently 90% higher than in the 2010 elections. We expect the elections to add about US$3 billion in net ad expenditure to the US ad market this year. The total amount spent on political advertising will be higher, but political spending will also crowd out advertising from other categories in the run-up to the elections.

We have downgraded Asia Pacific and Latin America slightly, after their exports to developed markets weakened further. We now predict ad expenditure in 2012 to grow 6.2% in Asia Pacific (down from 6.7% in June), and 7.7% in Latin America (down from 7.8%). We then expect Asia Pacific to expand at a consistent annual rate of 6% in 2013 and 2014, or 8% to 9% excluding Japan, while Latin America expands at 9% to 10%.

Ad markets in Middle East & North Africa are still constrained by the region’s social and political turmoil, which has left many advertisers cautious about attracting negative attention. We forecast just 1.0% growth in ad expenditure here this year, followed by 2.8% in 2013 and 2.3% in 2014.

Despite the rapid growth of the developing markets, the US is still the biggest contributor of new ad dollars to the global market. Between 2011 and 2014 we expect the US to contribute 29% of the US$69 billion that will be added to global adspend. Between them, China, Brazil, Russia and Indonesia will contribute another 36%. Overall, we predict developing markets will account for 59% of all adspend growth over this period, increasing their share of global ad expenditure from 33.0% to 36.2%.

Top ten contributors to adspend growth (2014 v 2011)

US$ million, current prices. Currency conversion at 2011 average rates.

   

Adspend growth

1 USA

19,821

2 China

11,641

3 Brazil

5,397

4 Russia

4,026

5 Indonesia

3,911

6 Japan

3,015

7 Argentina

2,268

8 South Africa

2,067

9 UK

1,883

10 South Korea

1,702

Source: ZenithOptimedia

We predict Brazil will overtake the UK to become the fifth largest ad market in 2013, and in 2014 Russia will overtake Canada to become the ninth largest. China is already third largest and is steadily approaching Japan.

Top ten ad markets

US$ million, current prices. Currency conversion at 2011 average rates.

  2011

Adspend

  2014

Adspend

1 USA

154,129

1 USA

173,950

2 Japan

49,949

2 Japan

52,964

3 China

32,299

3 China

43,940

4 Germany

25,571

4 Germany

26,828

5 UK

19,204

5 Brazil

22,216

6 Brazil

16,819

6 UK

21,088

7 France

13,788

7 France

14,216

8 Australia

12,767

8 Australia

13,770

9 Canada

10,974

9 Russia

12,593

10 South Korea

10,232

10 Canada

12,394

Source: ZenithOptimedia

Global advertising expenditure by medium

The internet is by far the fastest growing medium – we forecast it to grow on average by 15% a year between 2011 and 2014. Display is the fastest-growing sub-category, with 20% annual growth, thanks to the rapid rise of social media and online video advertising. Display advertising is now growing substantially faster than paid search (which we forecast will grow by 14% a year to 2014) and classified (6% a year). Display advertising accounted for 36% of internet advertising in 2011; by 2014 we expect this proportion to increase to 40%.

Internet advertising by type

US$ million, current prices Currency conversion at 2011 average rates.

 

2010

2011

2012

2013

2014

Display

22,543

27,444

32,757

39,173

46,892

Classified

11,443

11,063

11,830

12,571

13,296

Paid search

33,851

38,111

43,826

50,016

56,649

Total

67,837

76,618

88,413

101,761

116,837

Source: ZenithOptimedia

Overall, we predict internet advertising will increase its share of the ad market from 16.0% in 2011 to 21.4% in 2014. Internet advertising already accounts for more than 25% of ad expenditure in five markets (Denmark, Norway, South Korea, Sweden and the UK), and by 2014 we expect it to account for more than 30% in seven markets (Australia, Canada, Denmark, Norway, South Korea, Sweden and the UK). In the most advanced market – the UK – internet advertising attracted 33% of expenditure in 2011, and we forecast it to attract 40% in 2014. There is clearly potential for the internet’s global market share to continue to grow for many years to come.

The internet is also the biggest contributor of new ad dollars to the global market. Between 2011 and 2014 we expect internet advertising to account for 60% of the growth in total expenditure. The next biggest is television, which we forecast to contribute 41% of growth. (The two add up to more than 100% because newspapers and magazines are subtracting from total growth.) Television’s share of the global ad market has risen steadily over the last few years: it reached 40.2% in 2011, up from 36.9% in 2005. The amount of time viewers spend watching television has increased, and even though viewers are presented with a wider choice of channels than ever, the biggest television events are attracting record audiences. The rise of the developing markets has helped lift television’s share as well, since these markets tend to rely heavily on television. We expect the European football championship, the Summer Olympics and the US elections to help lift television’s share to 40.4% of global ad expenditure in 2012, its highest ever.

 The internet has risen principally at the expense of print. Between 2001 and 2011 the internet’s share of global advertising rose by 14 percentage points, while newspapers’ share fell 12 points and magazines’ share fell by 5 points. We forecast newspaper and magazine advertising to continue to shrink, by an average 2% a year over the rest of our forecast period. Note that these figures include only advertising in printed editions of these publications, not on their websites, or in tablet editions or mobile apps, all of which are picked up in our internet category. The prospects for newspaper and magazine publishers are therefore not quite as bleak as our headline figures would make them appear.

Advertising expenditure by medium

US$ million, current prices Currency conversion at 2011 average rates.

 

2010

2011

2012

2013

2014

Newspapers

98,337

96,520

93,844

92,626

91,682

Magazines

45,216

44,933

43,644

43,088

42,860

Television

183,042

191,907

200,490

209,465

219,860

Radio

32,784

33,751

34,478

35,526

36,506

Cinema

2,358

2,472

2,721

2,782

2,984

Outdoor

30,975

31,741

32,263

33,309

34,629

Internet

67,837

76,618

88,413

101,761

116,837

Total *

460,550

477,941

495,854

518,557

545,358

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 (%)

 

2010

2011

2012

2013

2014

Newspapers

21.4

20.2

18.9

17.9

16.8

Magazines

9.8

9.4

8.8

8.3

7.9

Television

39.7

40.2

40.4

40.4

40.3

Radio

7.1

7.1

7.0

6.9

6.7

Cinema

0.5

0.5

0.5

0.5

0.5

Outdoor

6.7

6.6

6.5

6.4

6.3

Internet

14.7

16.0

17.8

19.6

21.4

 Advertising Expenditure Forecasts is published quarterly priced £435. It may be ordered in hard or soft copy from www.zenithoptimedia.com