Magna revises 2010 UK ad forecast following strong perfomance by TV
Magna Global has raised its UK advertising forecast for 2010 due to increasing revenues at a ‘faster-than-expected pace’ during the first half of the year, led by the television sector.
The revised estimate for 2010 growth is now a 6.2% increase, up from the original 3.1% forecast. Magna expects the media economy to generate £11.6 billion in advertising during 2010, which is around the same level as 2005.
As a result, Magna has also increased its longer-term growth rates for 2010 to 2015 – up from a 2.7% rise to 3.3%.
The group said growth in the industry accelerated when the new coalition government started to slash its own advertising budget, which suggests a “greater resilience than originally thought”.
In August, business optimism and retail sales also improved considerably, according to the report. However, it noted that consumer confidence and credit growth continues to be weak and could restrain future growth.
The Magna Global report also warns that a slump in ad revenue growth post-World Cup has led to a more restrained upgrade in forecasts.
However, a strong performance from the television industry has encouragingly resulted in a positive forecast, albeit it a ‘carefully’ revised one. Magna said the medium has “benefited from a ‘flight to quality’ with advertisers retreating into proven media given broad economic uncertainty”.
Leading the way is ITV1, which “grew well ahead of the company’s own expectations, in large part due to World Cup coverage during June”, the report said.
Television is faring better than initially expected during the recession recovery, however, the report warns that this is mainly due to the general election in May and the World Cup, both of which concentrated spend into the first half of the year.
As a result, there is a significant amount of uncertainty going forward, especially for Q4 2010 – a critical period as the sector will face tougher comparables and a potentially weaker economy, the report says.
Going forward, Magna says the television industry is unlikely to see such rapid growth, despite a “modest boost” from the Olympics in 2012. “Advertisers will not increase the budget shares they allocate to the medium as rapidly as they did in 2010,” the report claims. As such, the group forecast more moderate growth for television over the next five years – an average of 3.6% gains each year through 2015, down from 5.5% previously.
However, online advertising is expected to grow faster than television this year and sustain much of its growth in the years ahead, according to the report. “As a primary beneficiary of incremental advertising budgets, the upgrade in our total forecast contributes to increased estimates for both search and other online advertising, which we now forecast will grow 12.8% and 5.8% respectively during 2010.”
“Collectively, online advertising should grow 7.8% each year on average through 2015, by which time the medium will account for more than 35% of the industry, greater than £4.8 billion in total,” the report says.
On a general note, Magna said the industry’s focus on television in 2010 meant less was spent on print and radio. As a result, Magna’s radio growth forecasts remain modest – 2.9% for 2010. Publishers’ advertising revenues, on the other hand, are yet to stabilise, according to Magna. The group expects newspapers and magazines to be down slightly in 2010 – 1.9% and 2% respectively. However, Outdoor is faring better than expected and is now likely to be up 7.6% for the year.