INSIGHTanalysis: Media Healthcheck – October 2003

WPP says that there is evidence of clients switching their attention from three years of cost management to top-line revenue growth. However, growth is occurring at different rates across the globe. The North American market has not only stabilised but has started to pick up with accelerated rates of growth in each of the last four quarters. Meanwhile, the UK is still heavily affected by the recession and business is better in Continental Europe, it says.

Initiative Media’s CEO, Alec Gerster, says that US advertising markets are starting to look ‘a little brighter’, although growth remains uneven and there does not appear to be a swell in demand prior to the year-end.

Alain de Pouzilhac, chief executive of French advertising network Havas, says that there will not be a revival in worldwide advertising growth until the fourth quarter of next year, at the earliest. De Pouzilhac believes that the markets will continue to lack visibility in the coming months and forecasts 3% to 3.5% global ad growth next year.

Jack Myers notes that the US market is growing faster than anticipated and is predicted to reach $164 billion this year, up 3.5% on 2002. The prognosis is for continued strong media performance in the election year of 2004, before a slowdown begins. However, 2006 is shaping up to be a rebound year, says Myers.

Analysts at Lehman Brothers say that the leading advertising agencies are well positioned to take advantage of the improving market situation in 2004. Despite the mixed signals, the broker claims 60% of the world should see solid advertising growth next year, driven by the US and Asia.

Interdeco’s Ad Barometer report concurs, saying that conditions in Europe remain weaker, whilst the US markets continue to show more positive growth. It forecasts global ad growth of 1.7% this year and 3.2% in 2004.

PricewaterhouseCoopers’ European Entertainment And Media Outlook says that advertising spend across Europe’s six major markets will be virtually flat this year, at just 0.3%, but the improving economic situation should ensure stronger increases from 2004.

UK outlook Cautious optimism in the UK media and advertising markets has become ‘reduced pessimism’ in the latest Bellwether report from the IPA. The Q3 2003 survey shows that on the whole marketing budgets are still being cut, but by fewer companies than in the previous report.

Media advertising expenditure has been revised down, on average, for the last eleven quarters, according to the Bellwether. However, the net balance for Q3 2003 was just -3.4%, the lowest decline since Q2 2002. This leads to the IPA’s assessment of ‘reduced pessimism’.

Meanwhile, media consultant John Billett, claimed that there is no prospect of a recovery in UK television advertising, at least in the short term. “There isn’t going to be a renaissance in television buying as far as the eye can see,” he told the Times last month.

There were some signs of improving market sentiment though, as the Technology, Media and Telecommunications (TMT) FTSE shares index rose by 12.2% across the course of October as shown.