Conditions Are Firming For Ad Recovery, Says ZenithOptimedia

According to the latest set of forecasts from ZenithOptimedia, the UK’s major media spend will rise by 3.2% in 2004 in current currency terms; this follows a 1.1% rise in 2003 on the same basis. Across the whole of Europe spend will rise by just 2.1% next year after a growth of 1.0% in 2003.

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.