Underlying ad recovery continues despite Middle East & Japan

ZenithOptimedia now forecasts global ad expenditure to grow by 4.2% in 2011, down from the 4.6% it forecast in December, as a result of the political turmoil in the Middle East and the earthquake in Japan.

• Zenith’s first estimate is that these one-off events have knocked about US $2.4 billion off this year’s global ad expenditure
• The underlying recovery remains healthy, though, and as such, Zenith has upgraded its forecast for 2012 from 5.2% to 5.8%
• Developing markets to increase their share of global ad expenditure from 30.9% in 2010 to 35.1% in 2013
• Internet to become the world’s second-largest advertising medium in 2013, overtaking newspapers

The events in Japan and the Middle East had immediate consequences for advertising in the affected markets. In Egypt – by far the largest ad market to be caught up in the Middle Eastern uprisings – there was almost no advertising on television during the revolution, and in the aftermath advertisers have been very careful about the content and placement of their messages.

In Japan broadcasters replaced almost all commercial ad slots with public-service announcements for weeks after the earthquake, and blackouts and distribution problems will hinder media consumption for months to come.

“We do not expect these shocks to derail the global recovery in the long term, however,” Zenith said. “We expect some of the missing advertising to reappear later in the year, followed by strong growth in these markets in 2012 thanks to the easy comparison with the first quarter of this year. Japan is forecast to shrink 4.1% this year then grow 4.6% next year, while Egypt follows this year’s 20.0% drop with 12.1% recovery in 2012.”

Overall, Zenith forecasts 5.8% growth in global ad expenditure in 2012, up from its prediction of 5.2% growth last December. This is partly the result of the rebound in Japan and the Middle East, and partly thanks to further strengthening in Western and Central & Eastern Europe, where advertisers are becoming more confident of the long-term economic prospects, according to Zenith.

“We forecast North America to grow by an average of 3.1% a year between 2010 and 2013 and Western Europe to grow by 3.5%. We expect Japan to grow just 0.7% a year, though this obscures the big drop in 2011 followed by the recovery of lost ground over the next two years.

“We forecast 0.1% annual growth in the Middle East, as advertisers tread carefully amid political instability. Meanwhile, we forecast Latin America to grow by 8.2% a year, Central & Eastern Europe by 12.4%, Asia Pacific by 6.6%, and Asia Pacific excluding Japan to grow by 10.2%. Developing markets – which we here define as everywhere outside North America, Western Europe and Japan – will increase their share of the global ad market from 30.9% in 2010 to 35.1% in 2013.”

Top ten ad markets

“The sheer size of the US – 3.5 times the next-largest market – means it will contribute the most new ad dollars to the global market over the next three years (US$14.2 billion), despite its slow growth. However, the next five largest contributors are all developing markets: China (which contributes almost as much as the US, US$10.8 billion), Russia (US$6.9 billion), Brazil (US$3.3 billion), India (US$2.5 billion) and Indonesia (US$2.4 billion). Overall we predict developing markets will contribute 62% of new ad dollars over the next three years.

Global advertising expenditure by medium

Zenith predicts that the internet will overtake newspapers to become the world’s second-largest advertising medium in 2013.

Newspaper ad expenditure was still 51% larger than internet ad expenditure in 2010, but newspaper expenditure is shrinking by 1.4% a year, as circulations continue to fall in developed markets, and readers migrate to the internet.

Meanwhile internet advertising continues to grow, at a forecast average rate of 14.4% a year between 2010 and 2013. Zenith expects newspaper ad expenditure to fall from US$95.2 billion in 2010 to US$91.2 billion in 2013, while internet ad expenditure rises from US$63.0 billion to US$94.5 billion over the same period.

This year display advertising has taken over from search as the main driver of internet ad growth. Zenith predicts global display ad expenditure to grow at an average of 16.4% a year to 2013, while paid search grows by 12.8% and classified by 10.2%.

Television remains by far the largest medium and is continuing to increase its market share. Television attracted 40.4% of global ad expenditure in 2010, up from 37.3% five years earlier, and Zenith expects it to attract 41.7% in 2013.

Bigger and higher-quality displays, more channels delivered by digital television, and the convenience of PVRs mean people are watching more television than ever. The report forecasts television ad expenditure to rise from US$180.3 billion in 2010 to US$216.0 billion in 2013.

Share of total adspend by medium (%)