INSIGHTanalysis: Media Healthcheck – October 2004
During October, some of the world’s largest advertising agencies posted revenue results that beat all expectations, giving the advertising market another confidence boost, which led to a number of industry watchers returning to previous growth predictions.
The latest Bellwether and Interactive Advertising Bureau (IAB) research also confirmed that marketing budgets are continuing to rise throughout the year despite high oil prices, rising interest rates and economic worries which could be hampering ad market recovery.
The IPA’s latest quarterly Bellwether report revealed that the number of UK companies increasing their marketing spend outnumbered those cutting it for the fourth consecutive quarter.
Commenting on the latest report, WPP’s chief executive, Sir Martin Sorrell said: “The UK is showing a marked recovery, recouping the levels achieved in 2000. Investment in media advertising expanding, with areas such as direct, interactive and internet expanding even faster as clients seek more effective cpms and more quantifiable communications services.”
The IAB and PricewaterhouseCoopers quarterly update showed that during the first half of this year online advertising spend rocketed by 76% to just under £267 million, taking the medium’s share of overall UK adspend to an all time high of 3.2%, placing it well ahead of cinema and putting it on track to reach its goal of overtaking radio by 2007.
As a result of the latest figures, the IAB said it is confident that total adspend for 2004 will top the half billion mark.
Although 2004 is turning out to be the best year for the advertising market since the dot-com boom, the author of the Bellwether report, Christopher Williamson said growth in advertising expenditure is likely to slip in the second half of this year.
According to Williamson, marketing budgets at the start of 2004 were set higher than 2003, however such an initial increase had been seen in each of the previous year, only to be whittled away as budgets were steadily revised down as each year progressed.
Another hot topic during October was the effect of new digital media on their traditional counterparts such as radio and television.
Bill Gates, head of the world’s largest software company, Microsoft, predicted a future for the entertainment industry in which traditional broadcast television is rendered irrelevant.
Referring the advent of personal video recorders and digital video recorders (DVRs), Gates said: “Broadcast TV is under a challenge. That’s news to no one. The idea of just having that one linear [schedule] thing – you don’t change your channel, so the local news leads to the whole lineup getting this great popularity – that’s on its way out, but slowly.”
He added that what people really want is content on the internet that they can have a direct relationship with.
At Merrill Lynch’s media conference in October, analysts also warned of the effect DVRs would have on television. One analyst said: “Although penetration is currently low, digital video recorders are a significant long term threat to television and in the future more advertising will be integrated into content or overlaid on top of programmes.”
The World Association of Newspapers said that newspapers have to be cleverer if they want to be winners in the digital world. Although advertising on the internet is seeing significant growth, it remains a modest part of newspaper revenues and could do for many years to come unless publishers look for other means to make their websites more profitable, such as delivering news content that people actually want to pay for.
It seems that internet growth in the UK will continue for some time yet, as many people switch to a high-speed broadband connection. Research group, Instat said that worldwide, broadband is to this decade what cable television was to the 1980s as subscriber figures climb from 24 million in 2003 to 50 million by 2008.