UK Advertising Forecasts

Exec Report: The prognosis for 2010 has improved considerably since the December round of
forecasts, with Group M, the Advertising Association, Magna, Carat and Zenith Optimedia
all upgrading their forecasts for UK adspend in 2010.
With a series of positive indicators coming from major media owners – an 8% year-on-year
increase in TV advertising revenues for ITV in Q1 2010, and News Group Newspapers
enjoying a 10% lift in the same period – forecasters are now expecting overall ad revenues
to grow by between 1.3 and 3% this year.
Most bullish are buying groups Group
M, Magna and Carat, forecasting
4.2%, 3.0% and 2.9% respectively,
followed by the Advertising
Association/WARC at 2.3%, while
Zenith Optimedia have opted for a
more conservative 1.3%.
Group M’s June 2010 forecast of
4.2% growth, revised upwards from
their 0.1% growth forecast in December 2009, highlights the resurgence in optimism. But
much may still revolve around the decision of the new coalition Government to take a large
slice out of the £232m public adspend budget, and secondarily the effect that public deficit
reduction may have on the broader economic situation.
2011 forecasts retain some caution, with most recent forecasts suggesting minimal growth,
effectively a decline when adjusting for inflation. Zenith Optimedia predict only 1.0%, and
Magma 0.9%, while Group M and Carat are a little more optimistic with their 3.3% and
4.2% respectively.
Group M
The voice of WPP’s media buying arm has such influence within the industry, that the
latest forecasts are said to have been signed off by Sir Martin Sorrell himself. Given the
media sage’s knack of making the right call in recent years, we expect a bit more reliability
from these numbers than forecasters were able to offer in 2009.
Television, boosted by a number of factors, is expected to fare best of the traditional media
with 11.6% growth, adding £100m to revenues in the process. TV has enjoyed an increase
in viewing levels in recent years, helping to reduce costs to advertisers and making the
medium even more competitive. Combined with the World Cup, TV companies are
expected to enjoy a year of respite, but with a slight levelling off of 3% growth in 2011.
Having endured a harder time than most, Radio is expected to grow 6% this year, to
revenues of £364m. This will be welcome respite after five years of share decline, and the
RAB predicts that within this figure, national advertising could grow by as much as 15%.
Casting some doubt on this forecast is the new Government’s decision to cut back on COI
adspend: according to Campaign, COI spend represented 16% of radio spot advertising
spend last year. If the expected cut of up to a half of COI adspend were to hit radio
proportionately, it would plunge the medium back into negative growth.
Group M expects the whole print sector to continue to decline in 2010, with only
newspapers returning to some growth in 2011. The forecasts will hide some better news
for publishing businesses, who can hope to gain revenues from their growing digital
properties.
Regional newspapers and B2B magazines are expected to be worse hit. 2009 saw the
closure of print titles like our own Media Week, while online sources are able to deliver
quick access to detailed B2B information, sometimes with a robust subscription model.
Print group Trinity Mirror has illustrated the suffering of the big regional press groups,
falling out of the FTSE 250 list of the UK’s most valuable companies, after losing 50% of
its share price value in the first half of the year.
Outdoor adspend is predicted to grow by 6.5% this year, which will be a relief for the sector
where, like some other UK media, only two major multi-format groups now survive
following a period of consolidation. The arrival of new POSTAR measurement later this
year, with the ability to plan across all outdoor formats using the same metrics, should
provide a boost.
Similarly, Cinema is expected to see a 5.4% growth, boosted by the re-emergence of 3D.
Perhaps surprisingly, Group M only expects Internet advertising to grow by 7.1% this year,
although they still expect Internet as a whole to stay ahead of TV in total marketing spend.
Within this figure lies an array of different types of online advertising. While the larger
Search may be in a phase of steadier growth, online display may be set for a boost in
2010 as understanding of effect beyond the click starts to grow, and advertisers put more
weight into online display with the arrival of UKOM standardised planning data.
While still only expected to represent £55m of spend in 2010, Mobile is forecast to enjoy
strong double-digit growth of 46% this year and 36% next. The marketing limitations of
most existing internet-enabled phones will cease to become as much of a barrier, as
renewing subscriptions convert en masse to big-screen 3G smartphones.
Magna
At the start of April, Magna (the aggregated media buying arm of Interpublic) upgraded its
2010 growth forecast for UK media supplier ad revenues to 3%, up from its previous
forecast of 1%. It now estimates that the media economy will reach £11.3 billion in 2010 –
roughly 2004 levels.
Major broadcasters’ advertising revenues have significantly outperformed market
expectations, leading Magna to forecast 3.5% TV advertising growth in 2010, despite
“concerns that the Contract Rights Renewal burden would depress pricing at leading
broadcaster ITV, and in turn set a benchmark for market pricing”.
Online has become the UK’s dominant advertising medium and Magna estimates it will
continue to grow above market rates in 2010. Search and display are forecast to grow
12% and 5.7% each during 2010.
Despite the obvious pitfalls, Magna also attempts to predict changes to the media market
for the next six years, to 2015. In total, Magna expects media supplier revenues to grow at
a 2.5% average rate to £12.8 billion in 2015. Despite reasonable growth across the period
generally, 2011 is expected to be flatter as search advertising in particular levels off.
Zenith Optimedia
Published in April, Zenith Optimedia Group’s forecasts retain the relative pessimism of the
late 2009 forecasting round, with 1.3% growth forecast for UK media in 2010, followed by
only 1.0% in 2011 and 2.1% in 2012.
ZOG’s forecasts predict continued decline of -5.0% for Newspapers in 2010, but then
expect things to keep getting worse with further declines of -1.5% in both 2011 and 2012.
This figure again disguises a lot of detail, as regional newspapers are experiencing greater
declines than nationals, and the nationals in particular are seeing some success with their
digital offerings to offset the changes in their traditional business models.
In contrast to Group M, ZOG predicts a 2 point fall for Radio in 2010, with a flat 2011 and a
recovery of 5 points in 2012. Similarly, Cinema is expected to fall -1.6% this year, and
recover somewhat with 1.9% and 1.2% growth in the following years.
TV is expected to lead the way in 2010 with 6% growth. Recovery indicators were already
being seen in TV in the first quarter of the year, but this is half the growth rate forecast by
Group M only two months later. The recession has made forecasting nearly impossible,
but the way in which successive forecasts are becoming cautiously more optimistic offers
us some hope that confidence is returning.
Zenith also expects Outdoor and Internet to grow at comparable rates year-on-year over
the period, with a good year for posters in 2012 as the Olympics comes to the UK.
Other forecasts in short
Carat
Aegis’ media buying group Carat upgraded its UK and global adspend forecasts in March,
predicting 2.9% growth in the UK this year, up from 1.4% forecast in October.
Advertising Association/WARC
The latest Advertising Association/Warc expenditure report forecasts a return to modest
growth, starting in Q1 2010. Their full-year prognosis of 2.3% growth represents a marked
improvement on its February 2010 forecast of 0.4%.
The report also shows that total advertising spend fell by 12.7% in 2009, the biggest fall
since measurement began in 1982.