ZenithOptimedia Ad Forecast: Boom in Developing Markets, Gloom in West

In its first advertising expenditure forecasts of 2008, ZenithOptimedia downgraded its combined growth forecasts for North America and Western Europe this year from 4.4 percent to 3.8 percent, as the credit crunch drains consumer and business confidence, reports MarketingCharts.

However, growth continues to strengthen elsewhere, and Zenith increased its 2008 forecasts for the rest of the world from 10.9 percent to 11.1 percent.

Other key highlights from the forecast:

• Developing market dynamism will maintain global ad growth above ten-year average despite sluggish growth in the developed world.
• Developing markets will contribute 63 percent of ad expenditure growth between 2007 and 2010, and increase their share of the global ad market from 27 percent to 33 percent.
• Asia Pacific will overtake Western Europe in 2010 to become second-largest ad market.
• Internet will account for 9.7 percent of world ad expenditure this year and 12.3 percent in 2010

Below, additional forecast info issued by ZenithOptimedia.

Advertising Expenditure by Region

See tables of major media ad expenditures and ad expenditure growth, by region, 2006-2010.

Combined (North America, Western Europe, and the rest of the world), the results point to a slight downgrade of global growth from 6.7 percent in the previous forecast to 6.5 percent - but still well above the 5.0 percent average rate at which the global ad market has grown for the last 10 years.

Zenith predicts continued above-trend growth in 2009 and 2010, again thanks to dynamism in Asia Pacific, Central & Eastern Europe, Latin America and the Middle East.

Developing markets will contribute significantly to growth in global ad expenditure (see table of top contributors):

• China and Russia follow closely behind the U.S. as contributors to growth over the next three years, even though China’s ad market is just 8 percent of the size of the U.S. ad market, and Russia’s is 5 percent.
• Brazil’s contribution is very nearly the same as the UK’s, while its ad market is less than half the size.

Between 2007 and 2010, China will rise from fifth to fourth in the rankings of the largest advertising markets; Russia will rise from eleventh to sixth; Brazil will rise from ninth to seventh; and India will rise from fourteenth to thirteenth. (View tables of top 10 ad markets, 2007 and 2010.)

Other geography-focused forecasts:

• Developed markets (North America, Western Europe and Japan) will contribute 37 percent of new ad expenditure between 2007 and 2010, while developing markets (everywhere else) will contribute 63 percent.
• Over that period, the proportion of global ad expenditure going to developing markets will rise from 27 percent to 33 percent, two percentage points more than forecast in December.
• Central & Eastern Europe, Latin America and Middle East/Africa/Rest of World are all growing at double digit-annual rates.
• Asia Pacific is growing less rapidly, because it includes Japan, which is barely growing at all. Excluding Japan, the region grew 13 percent in 2007, and is expected to grow 9 percent-13 percent a year to 2010.
• Asia Pacific (including Japan) will overtake Western Europe to become the second-largest advertising region in 2010.

Global Advertising Expenditure by Medium

View table of global ad expenditures, by medium, ‘06-’10.

Among the highlights:

• Zenith once again substantially increased its forecasts for internet advertising:
  • Internet ad expenditure by 2010 is forecast to reach $67 billion (up from $61 billion in the previous forecast) and account for 12.3 percent of the ad market (up from 11.5 percent).
  • Online video and local search are now generating substantial new revenues; in the slightly longer term, behavioral targeting on social-networking sites is expected to provide fruitful opportunities to advertisers.
• Some of the internet’s growth is coming at the expense of newspapers:
  • Newspapers are forecast to grow only 4 percent over the forecast period. After adjusting for inflation, this equates to a 5 percent decline in expenditure.
  • Advertising on newspapers’ websites is included in internet advertising and is helping newspaper publishers claw back some of their lost revenue.
• Cinema and outdoor are the only media apart from the internet to be gaining market share:
  • Cinema is growing rapidly in the US, where it is still quite new, and is benefiting from the spread of digital distribution technology, which is reducing production costs and allows advertisers to run time-sensitive campaigns and target local areas more easily.
  • Digital technology is likewise enhancing the value of outdoor to advertisers, as is contractors’ investment in research and improvement of non-digital displays.