Short-term optimism; mid-term caution in Zenith Global forecasts

On the face of it, ZenithOptimedia’s latest global ad revenue forecast headlines make positive reading – up from 3.5% to 4.8% for 2010; and the 2011 forecast increased too. However, reading deeper, this is tempered with not unexpected concerns over the next two years at least.

Zenith has increased its forecast for global growth from 4.5% to 4.6% for 2011, but that now “represents a minor slowdown after the surprisingly strong growth of 2010.”

“Advertisers in the developed markets remain cautious about the future, and will not commit to ambitious expansion plans while unemployment and debt remain so high, and government cuts threaten the recovery in demand.”

The report notes that advertising has fallen as a proportion of GDP from 0.88% in 2007 to 0.75% in 2010 and will fall further to 0.74% by 2012. However Zenith expect ad expenditure in 2012 to grow 5.4%, which is just below the growth rate of nominal GDP. When economic confidence returns this will “exceed the 6% GDP growth rate”.

It is expected that TV and the internet will continue to win market share – TV up from 39.2% in 2009 to 41.6% in 2012, the internet up from 1.28% to 16.5% over the same period.

Western Europe has fared well in 2010, partly thanks to the World Cup, and it seems not in correlation to their teams’ lousy performances – France forecast to be up 4% now for 2010 and the UK up 4.5%. Finland, Norway, Sweden and Belgium are all forecast even higher growth this year.

Zenith expects Western Europe to grow 3% in 2010 and the same in 2011, but this is dwarfed by Central & eastern Europe (7.25 and 9.9%) and Latin America at a whopping 17% this year, followed by “a more sustainable 9% in 2011 and 2012”.

In Asia Pacific, Japan holds back the area’s numbers – 11.4%, 10.1% and 11.2% without Japan; 6.3%, 6.4% and 7.4% with Japan included. Zenith sees double digit growth this year in China, India, Indonesia, Malaysia, Pakistan, the Phillipines, Thailand and Vietnam.