Global Ad Expenditure Predicted To Grow 6.1% in 2006

ZenithOptimedia says that as the global economy is growing slightly above trend, so advertising’s contribution to GDP is stable. This suggests that current steady adspend growth will be sustainable for several years to come. The two previous advertising recessions happened after advertising grew faster than GDP for several years.

During the last recession ad expenditure fell from 1.07% of GDP in 2000 to 0.96% in 2003. It has yet to exceed this level, and ZenithOptimedia does not expect it to do so over our forecast period.

The World Cup is contributing to this year’s strong global growth, but not in all markets. In the US, for example, football remains a minority sport, with the Winter Olympics proving to be the main sporting event of the year in that market. ZenitOptimedia also expects heavy spending in the run up to the mid-term elections in November.

The World Cup has, says the research, had surprisingly little effect on the ad market in Germany. Total ad expenditure in Germany is expected to grow by 1.6% in 2006, up from 1.2% in 2005. Some of this extra growth may be attributable to football-themed campaigns in print, online and outdoor, but most of the matches have been shown on Germany’s public channels. These are permitted to sell very little airtime, so advertisers have not been able to make much use of the television coverage. ZenithOptimedia expects growth in television expenditure to decline slightly in 2006, to 1.5% from 1.8% in 2005.

Carat recently lowered its forecast for UK adspend growth from 4.5% to 3.2% for 2006 in its Global Market Update owing to less than expected growth from the World Cup (see UK Advertising Growth Hit By World Cup).

The football has made a greater impact elsewhere in Europe, notably in Belgium, France and the Netherlands, in each of which ZenithOptimedia expects television ad expenditure to accelerate markedly in 2006. This is the first World Cup to be shown on commercial television in north Belgium, creating new opportunities for advertisers there. In Asia, the extra advertising stimulated by the competition has been particularly notable in Malaysia and South Korea.

Internet advertising will this year overtake outdoor and is growing faster than any other medium, which is put down to rapid innovation in the types of internet advertising, and in ways of measuring it and tracking consumers’ responses to it. Internet ad expenditure is forecast to grow 76% between 2005 and 2008, while the other media grow by between 10% (for radio) and 27% (for cinema). The internet is now predicted to account for 7% of worldwide ad expenditure by 2008, up from the 6.5% forecast in April and 6.0% in December; it accounted for 4.7% in 2005.

The main drivers of the growth in internet expenditure have been telecommunications and finance, which together increased their expenditure on internet advertising by US$1.7 billion between 2001 and 2005, and accounted for 17% of the growth in total internet ad expenditure over that period. A recent report by Initiative forecast that online adspend will rise globally by 27%, with a 26% rise in the UK (see Internet Adspend Likely To Grow For 2006)

The five largest advertising categories are retail, auto, telecommunications, medicine and finance. Retail is the largest, accounting for US$49 billion in ad expenditure worldwide in 2005, up from US$33 billion in 2001.

ZenithOptimedia says that of all the big categories, retail advertisers spend the most on newspaper advertising, and the proportion of their budgets they allocate to newspapers has barely fallen over the past five years, from 40% in 2001 to 39% in 2005, despite the steady decline of newspaper circulation in developed markets.

Retail, finance and telecommunications advertisers all spent proportionately more on television in 2005 than in 2001. ZenithOptimedia says that although some of the advertisers might worry about the fragmentation of audiences caused by the spread of digital television and the increase in PVRs, collectively they have demonstrated their confidence in the power of television advertising.