Conditions Are Firming For Ad Recovery, Says ZenithOptimedia

Global display advertising expenditure will rise by 4.7% next year, with Europe and the UK under-performing the average whilst the US continues to drive the recovery.
Europe has lost advertising share to other world regions and ZenithOptimedia believes that it may never regain this share, describing the continent’s advertising market as ‘sclerotic’.
Between 1998 and 2002 Europe’s share peaked at 25% and has since retreated to 24%. The US’ economic freedom is helping it to sustain a global display adspend share of between 45% and 46%. The North Asia group (Greater China plus South Korea) is adding share too, from 5% in 2003 to 6% in 2004.
“Another way of illustrating Europe’s stasis, caused, we suspect, by an oversized public sector, is the seeming inability for advertising ever to account for much more than 0.9% of the regional economy. The USA is stable at 1.4%. We expect Asia to reach the current European level of 0.8% in 2004 and overtake it in 2005,” says the report.
Worldwide Advertising Expenditure By Region ($ million, current prices) | |||||
2002 | 2003 | 2004 | 2005 | 2006 | |
North America | 149,681 | 154,178 | 161,962 | 168,722 | 176,018 |
of which: USA | 144,463 | 148,786 | 156,389 | 162,976 | 170,102 |
Canada | 5,218 | 5,392 | 5,573 | 5,746 | 5,916 |
Europe | 76,809 | 78,174 | 81,056 | 84,172 | 87,740 |
of which: France | 9,031 | 9,123 | 9,319 | 9,557 | 9,842 |
Germany | 16,973 | 17,221 | 17,690 | 18,354 | 19,272 |
Italy | 7,087 | 7,071 | 7,281 | 7,544 | 7,860 |
Spain | 5,083 | 5,128 | 5,298 | 5,503 | 5,731 |
UK | 15,249 | 15,418 | 15,904 | 16,359 | 16,834 |
Asia-Pacific | 61,904 | 65,088 | 68,410 | 72,329 | 76,916 |
of which: Japan | 33,516 | 33,775 | 34,297 | 34,939 | 35,649 |
Latin America | 17,458 | 17,897 | 17,997 | 18,486 | 19,067 |
Rest of world | 10,689 | 11,867 | 13,154 | 14,400 | 15,645 |
Major media total | 316,541 | 327,204 | 342,578 | 358,109 | 375,386 |
Source: ZenithOptimedia, December 2003 |
World Advertising Growth Forecasts (%) | ||||||||
2003 v 2002 | 2004 v 2003 | 2005 v 2004 | 2006 v 2005 | |||||
Current | Constant | Current | Constant | Current | Constant | Current | Constant | |
North America | 3.0 | 0.8 | 5.0 | 3.9 | 4.2 | 2.8 | 4.3 | 2.3 |
of which: USA | 3.0 | 0.8 | 5.1 | 4.0 | 4.2 | 2.9 | 4.4 | 2.3 |
Canada | 3.3 | 0.5 | 3.4 | 1.8 | 3.1 | 1.3 | 3.0 | 1.1 |
Europe | 1.8 | -0.2 | 3.7 | 2.2 | 3.8 | 2.2 | 4.2 | 2.5 |
of which: France | 1.0 | -0.9 | 2.1 | 1.1 | 2.6 | 1.4 | 3.0 | 1.8 |
Germany | 1.5 | 0.8 | 2.7 | 2.8 | 3.8 | 3.5 | 5.0 | 4.7 |
Italy | -0.2 | -2.8 | 3.0 | 0.2 | 3.6 | 1.2 | 4.2 | 1.9 |
Spain | 0.9 | -1.6 | 3.3 | 1.9 | 3.9 | 2.2 | 4.1 | 2.3 |
UK | 1.1 | -1.7 | 3.2 | 1.0 | 2.9 | 0.2 | 2.9 | 0.1 |
Asia-Pacific | 5.1 | 4.3 | 5.1 | 4.6 | 5.7 | 4.9 | 6.3 | 5.3 |
of which: Japan | 0.8 | 1.3 | 1.5 | 2.4 | 1.9 | 2.6 | 2.0 | 2.6 |
Latin America | 2.5 | – | 0.6 | – | 2.7 | – | 3.1 | – |
Rest of world | 11.0 | – | 10.8 | – | 9.5 | – | 8.6 | – |
Major media total | 3.4 | 1.3 | 4.7 | 3.6 | 4.5 | 3.1 | 4.8 | 3.0 |
Source: ZenithOptimedia, December 2003 |
The global economy ZenithOptimedia says that the global economy looks set to outpace its long-term growth rate next year for the first time since 2000. Typically, in an advertising recovery, the ad market will grow at a faster rate than the wider economy (in a downturn, the inverse is true).
“In past recovery cycles, we have tended to underestimate how fast advertising will grow. We would like more certain evidence of economic recovery before admitting we might be ‘lowballing’ advertising expenditure this time around. But we are growing more confident that the upside potential from here is greater than the downside risk of disappointment, global events permitting,” says the report.
Improving corporate profitability in the US should provide a solid base from which the ad market can continue to rebound. The US will continue to account for more than 45% of global display advertising expenditure for at least the next three years.
Both the US and global markets will benefit in 2004 from the ‘quadrennial effect’. This refers to the influx of advertising dollars surrounding the Olympics and the presidential elections, as well as the European football championships.
The UK picture The European Championship will help drive UK TV revenues up by 4% in 2004, with the hysteria having already started, according to ZenithOptimedia.
It says that ITV has successfully arrested its loss of viewing share in 2003 following years of attrition from the expanding pay-TV sector and aggressive competition from the BBC. Pay-TV growth remains vigorous and increases viewers’ exposure to ads. “TV audience supply looks equipped to accommodate recovery in advertiser demand without excessive price inflation,” predicts the group.
The press market will see marginal increases in nominal revenue in 2004. ZenithOptimedia says that advertisers and agencies are keen to see further activity from the Newspaper Marketing Agency following this year’s launch of its website and sports research.
It forecasts that recruitment and property advertising will remain positive in 2004 and any economic growth will reflect well in regional classified, which comprises two-thirds of regional press revenue.