This includes the economy, and part of the comings and goings of the economy worldwide and in South Africa is advertising spend. In financial crises, advertising and marketing budgets are the first to be cut. Clients are often advised to take advantage of competitor cutbacks, but that is an article all on its own.
Latest worldwide advertising expenditure
One of the biggest benefits for a media agency in South Africa is belonging to an international media group. ZenithOptimedia makes use of forecasting, with dedicated analysts probing and dissecting worldwide data. The latest worldwide advertising expenditure has been updated and released.
We have made a small reduction to its forecast for global ad expenditure growth in 2011 to 3.6%, which is 0.5 percentage points less than the forecast it made in July.
The slowdown in economic recovery in the developed markets, coupled with rising fears of double-dip recession, has caused some advertisers to trim back budget increases planned for the end of 2011, but there has been no sign of the cancelled campaigns and sharp budget cuts that signalled the beginning of the last advertising downturn in 2008. We now expect total ad expenditure to reach US$466 billion in 2011, up from US$450 billion in 2010.
We have made a similar reduction to our growth forecast for 2012: from 5.9% to 5.3%, still a reassuringly healthy rate. 2012 is a 'quadrennial' year and will benefit from the summer Olympics in the UK, the European Football Championship in Poland and Ukraine, and the presidential elections in the US. The growth rate will also be boosted by Japan's recovery from the earthquake in March 2011, which severely disrupted media and advertising for several weeks this year.
New forecast for 2013
The new forecast for 2013 is barely changed at 5.5%, down from 5.6% in July.
Soon after the last forecast in early July, financial markets fell sharply across the world, and they have been extremely volatile since then. This has naturally created concern that the ad market may be headed for another downturn. However, stock market shocks are not by themselves good indicators of ad market decline. There have been many cases when stock market crashes have been followed by continued growth in ad expenditure.
There does need to be a causal connection between the two. This connection can either be that an overvalued stock market is supporting excessive advertising (as was the case in 2000), or that the market correctly anticipates a sharp downturn in global economic activity.
There is certainly a risk of further economic downturn ahead, but the current consensus is that the developed economies face a sustained period of below-potential growth instead of decline, while developing markets will continue to grow rapidly, if at a cooler pace than in 2010.
Forecasts assume that economic growth remains weak in Europe and the US, but neither goes into double-dip recession, and the Eurozone debt crisis does not get substantially worse.
Developing markets, in general, continue to expand far faster than developed markets, driven by their much faster economic growth and it is forecast that they increase their share of the global ad market from 31.0% in 2010 to 34.9% in 2013. From a SA perspective, it is estimated that in 2013 it will be ranked sixth globally, contributing to global adspend growth.
As usual, the Internet is growing much faster than any other medium, at an average of 14.6% a year between 2010 and 2013. Display advertising (banners etc) is the fastest-growing segment, growing by 17.2% a year, driven mainly by online video and social media.
Overall, we predict Internet advertising will increase its share of the ad market from 14.4% in 2010 to 18.9% in 2013, when it will overtake newspapers to become the world's second-largest medium.
TV the main contributor to global ad growth
The main contributor to global ad growth, however, is television, which we forecast to account for 46% of new ad dollars between 2010 and 2013. Television's share of the global ad market has risen steadily over time: it attracted 39.8% of spend in 2010, up from 37.0% in 2005, and we forecast it to attract 40.5% in 2013.
Big-ticket television events are attracting record audiences. This year's Super Bowl, for example, was watched by 111 million Americans, making it the most watched broadcast in US history. It beat the previous year, itself a record breaker, by 4.2%.
Newspapers and magazines have been declining since 2007, with a brief pause for magazines in 2010, when ad expenditure remained essentially static. We expect this decline to continue throughout our forecast period.
Magazines are suffering less than newspapers because the experience of reading a magazine is less easy to replicate online, and because they do not rely so much on the timely delivery of information, where the Internet has a big advantage over newspapers.
Newspapers to fall behind
We predict magazine ad expenditure will shrink by 0.6% a year over our forecast period, while newspaper ad expenditure shrinks by 1.4%. In 2013, newspapers will fall behind the Internet into third place, with a 17.9% share of spend.
All in all, we should focus more on the 'bright side of life' - perhaps it's not all that bad.
