European Adspend Trails GDP Growth, Says PwC

Traditionally, advertising has outstripped growth in GDP but it is also particularly sensitive to economic cycles. Between 1998 and 2000, expenditure rose by almost 20% in the six countries but in the past two years, economic weakness resulted in a cumulative fall of 7%.

PwC expects overall advertising spending to rise by 0.3% to â‚Ź60.8 billion in 2003 as small declines in magazine, newspaper and outdoor advertising are offset by moderate increases in television and radio and a double-digit gain in online advertising.

The five-year outlook is somewhat brighter with adspend set to grow at compound annual growth rate (CAGR) of 2.3%. The first signs of recovery will appear in 2004 but advertising growth no longer outstrips GDP growth (which is predicted to average 2.7% between 2003 and 2007). The report claims that total media and entertainment spending will increase at a CAGR of 3.4% over the same period (see European E&M Industry To Remain Buoyant, Says Report). The economic upturn and high profile sporting events should provide the impetus.

“Advertising, so badly hit by the global events of the past few years will benefit from the major sporting events scheduled during the period under review, said Robert Boyle, European Leader, Entertainment & Media practice, PricewaterhouseCoopers. “The Football World Cup in Germany in 2006 is also likely to increase gate revenues and the TV rights for both this event and the Olympics in Athens will contribute to boosted revenues.”

However, there is little prospect of a return to the adspend growth rates seen in the years up to and including 2000. Publishing remains weak and the rapid increase in TV outlets, which drove television advertising rises in the late-nineties, has levelled off. Internet advertising has the most potential for growth and revenues are expected to increase at a CAGR of 9.3% between 2003 and 2007.