INSIGHTanalysis: Media Healthcheck – December 2004

First to be released were Zenith Optimedia’s global forecasts, which signalled that advertising expenditure was on target to reach $370 billion for the year, beating previous forecasts and proving 2004 to have been an outstanding year for advertising expenditure in traditional media. ZenithOptimedia’s new upbeat forecasts showed that, with a growth of 6.9% compared to 2003, this year is well above global economic growth of 4.7%.

ZenithOptimedia also forecast the Internet to be the fastest growing medium. Rising penetration, its increasing use for both response and brand advertising and the ever-growing versatility and variety of online content and applications are all contributing factors to this exponential growth. ZenithOptimedia has suggested that, while the Internet has a modest 3.6% share of global advertising in 2004, the medium is likely to account for more advertising spend than outdoor by 2010.

Next to be published were fresh estimates from Universal McCann, who claimed the summer Olympics and presidential election had resulted in a significant expansion in ad demand in the US in 2004. and the upward trend is expected to continue in 2005.

Bob Coen, director of forecasting at the agency says he now can predict that US and overseas companies will experience a slightly higher rate of ad growth than previously expected, and that final worldwide advertising expenditures, in local currencies, will expand by 6.4%, in contrast to last years’ forecast of 5.8%.

Mr Coen told Insight: “We’ve got a lot of postponed advertising because the economic growth was slow in 2004. Now the economy is firming up advertising is finally firming up, when business is lousy people don’t want to put their money into advertising”. He continued: “The biggest surprise for 2005 is the large increase in direct mail advertising, although this has been exceptionally hard to explain, the supposed reason could be because of the don’t call regulations.”

Analysts Merrill Lynch published their forecast in the second week of December and were more conservative than in their previous predictions, revising US adspend forecasts downwards to 4.8%, compared to its November prediction of 5.2%.

Merrill’s overall revision for 2005 was largely based on multiple changes by medium. The newspaper market has been revised downwards to 3.9%, from 5.1% previously. The absence of the Olympics forced Merrill Lynch to reduce its TV broadcast forecast, to a flat 0%, from the 3% growth predicted last month. Magazines were forecast to maintain a 5% growth, while the Internet is still predicted to achieve growth of 19% in 2005.

These forecasts differ starkly to the earlier predictions of Universal McCann and ZenithOptimedia.

The Advertising Association’s report followed soon after, stating that advertising expenditure in the third quarter of 2004 had totaled £3,610 million in the third quarter of 2004, with cinema surprisingly being the fastest growing medium, increasing by 23.1%, despite declines in the first two quarters of 2004. However, results for this quarter excluded the Internet which ZenithOptimedia, Universal McCann and Merrill Lynch all forecast to be the single fastest growing medium for 2004.

The AA said that total advertising expenditure for the quarter had increased year on year by 4.6% or a 3.3% in real terms, suggesting that total adspend is on track to reach the 4.8% growth for 2004.

The final advertising experts to publish their research and forecast were global advertising group Interdeco, who confirmed in their Ad Barometer report that the worldwide advertising market was recovering from the depression over the past three years. According to the report, 2004 will finish up with a growth of 5.3%, a figure that has been revised up from Interdeco’s March forecast of 4.0%. Interdeco agreed with the previous forecasts the much anticipated quadrennial events of the Olympics, Euro 2004 and the US presidential elections that have generally met expectations in television adspend.

Looking forward, Interdeco predicts that 2005 will experience continued growth, although at a slower rate compared to 2004. Adspend is forecast to be up by 3.2% next year, with overall worldwide economic growth decelerating.

Interdeco’s global predictions are more conservative than other advertising forecasters, with ZenithOptimedia being the most positive for 2004 and Universal McCann the most optimistic for 2005.