INSIGHTanalysis: Media Healthcheck – July 2005
July continued on from June’s theme of adspend revision, with Universal McCann’s Bob Coen, predicting total US adspend for 2005 to be up 5.7% year on year, reaching $278.7 billion, down from his previous estimate of 6.4% (see McCann Revises 2005 Adspend Estimates).
“There’s every sign that marketers and their management are sitting on their hands and holding their money pretty close to their chest. Something that was expected in terms of expanded spending didn’t take place.”
Just days after the new estimates from Universal McCann, Publicis Group-owned ZenithOptimedia also revised downwards its UK advertising expenditure forecasts for 2005, citing worries over the health of the economy as well as a ‘significant fall-off in advertiser demand’ in the second quarter of this year (see ZenithOptimedia Cuts 2005 Adspend Forecast).
The agency cut its predictions for UK advertising growth from the 4.9% forecast in April, to just 2.9%; a direct response to the sharp downturn in advertising spending that began after Easter.
Later on in July, however, ZenithOptimedia posted forecasts for global adspend growth in 2005, estimating an 4.7% increase and bringing advertising expenditure in line with expected GDP growth for this year (see Global Adspend Growth Forecast In Line With GDP).
July also saw the Advertising Association releasing its figures for UK 2004 adspend, revealing an increase of 5.6% year on year to £18.4 billion. Press was shown to account for the largest share of total advertising expenditure in 2004, at 47.5%. Television rose by 5.4% year on year to achieve a share of 25.8%, making it the second largest medium in terms of adspend and reaching a total of £4,740 million in 2004 (see UK Adspend Up 5.6% In 2004).
The lack of confidence in the advertising market was reflected in the latest IPA Bellwether Report, showing marketing budgets in the second quarter of 2005 cut for the first time in two years (see Q2 2005 Bellwether: Growing Concern Over Economy Leads To Budget Cuts).
Media adspend, which accounts for around one-third of all marketing spend, was hit hardest by the budget cuts, seeing the sharpest revision of all the Bellwether categories. This is mainly due to the switch from spend away from advertising in the main media towards comparatively lower-cost direct marketing and internet-related activities, designed to boost sales in the face of sluggish demand.
This downtrodden view of the economy is echoed in the latest Global Survey of Business Executives from The McKinsey Quarterly, which showed that the confidence of business executives around the world is in decline (see Continuing Decline In Global Economic Confidence).
Elsewhere, July saw strong growth in broadband uptake, with Europe overtaking North America as the second largest broadband market in the world. According to Strategy Analytic’s Europe Surges Ahead on Broadband report, total penetration in Western Europe is forecast to reach 63% by 2010, with 93% of online households using broadband to access the internet (see Europe Overtakes North America In Broadband Penetration).
As a result of the strong growth for broadband expected in Europe, e-commerce is rising in popularity across the continent. According to its latest Western Europe E-Commerce report released in July, eMarketer projects the sector to rise by 40% in 2005 (see European E-Commerce Forecast To Rise By 40% In 2005).
The report also shows Scandinavian countries and the Netherlands to have the greatest internet penetration, with Sweden the leader at a rate of 74% in 2004.
Sweden’s dominance in the European broadband market is confirmed by a new survey from the Association of Swedish Advertisers (ASA) showing that Swedish advertisers are placing greater importance on the internet as an advertising medium, with 72% of 89 advertisers questioned claiming to advertise online (see Increasing Online Uptake In Swedish Advertisers).