The latest advertising forecast from Merrill Lynch estimates 5.0% UK advertising growth in 2007, higher than the UK forecasts from both Aegis and Zenith.
The financial analyst forecasts 3.6% global advertising growth in 2007, comprising 4.3% Western European growth, 4.0% Latin American growth, 5.0% Asia Pacific growth and 2.9% US growth.
This is lower than McCann, ZenithOptimedia and Aegis’ global forecasts of 5.3%, 5.4% and 5.8% respectively in 2007.
| 2006 and 2007 Yearly Growth Forecast |
| YoY% Growth |
Mle 2006E |
MLe2007E |
Zenith 2007E |
Aegis 2007E |
| France |
3.20% |
5.20% |
3.30% |
2.00% |
| Germany |
1.90% |
2.60% |
1.60% |
1.50% |
| Italy |
3.60% |
4.50% |
3.30% |
2.60% |
| Spain |
5.90% |
5.20% |
5.40% |
4.00% |
| UK |
1.30% |
5.00% |
3.70% |
4.20% |
| Western Europe |
2.80% |
4.30% |
3.80% |
4.10% |
| US |
4.50% |
2.90% |
4.10% |
5.20% |
| Global |
4.30% |
3.60% |
5.40% |
5.80% |
| Source: Merrill Lynch estimates, Zenith MediaAegis |
Merrill Lynch’s US forecast of 2.9% for 2007 is also lower than McCann’s forecast of 4.8%, ZenithOptimedia’s 4.1% and Aegis’ 5.2%.
The financial analyst said that in most European countries, 2006 marks the fifth year that advertising underperformed the nominal GDP growth rate.
In the last cycle, advertising started to recover around year 4 (ie 1994), which implies that even if advertising outperforms nominal GDP growth in 2007, the recovery would take place two years later than in the last cycle.
Merrill Lynch says that one of the explanations for this lacklustre recovery, in its view, is the shift to the internet.
According to the analyst, there is an argument that until the rebalancing of advertising spend to the internet is complete, it will cause advertising growth to be more subdued than in the last cycle.
It adds that if the internet leads to price deflation, which has been the case in the UK, we could see advertising grow even less.
A recent a report from ZenithOptimedia said that UK advertising growth is expected to rise 3.1% in 2007, with online’s share of total UK adspend expected to grow to 17.2% by 2008, up from 12.95 in 2006 (see UK Advertising Growth Forecasts 2007).
According to OPera Media, strong increases in the online search and classified sectors will see total advertising spend increase by 3.0% for the year ahead (see Ofcom Plans New Public Service Channel To Rival BBC).
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