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Zenith, Magna: Automotive Trouble Leads to Drop in 2009 Ad Spending

ZenithOptimedia has cut its forecast for 2008 and 2009 again; the media arm of Publicis now predicts that U.S. ad spending in 2008 will shrink by 3.8% and will fall 6.2% in 2009. That’s down significantly from its last revision, in October, when the group was calling for 1.6% growth in 2008 and 0.7% growth in 2009.

While ad spending overall in 2009 will suffer, Zenith believes a recovery will begin in the second half of the year, with mild year-on-year growth compared to the difficult second half of 2008, Media Life writes. Global ad spending will slip 0.2% in 2009. Online and outdoor will continue to be bright spots amid the gloom.

GroupM predicts that U.S. ad spending will rise 0.3% in 2008 and will fall by 3% in 2009. In 2001, the ad economy fell 6% in the U.S., after growing 12% the previous year. It grew 1.7% in 2002.

Newspapers will continue to see the most difficult times, falling 12% this year and 15% next year, according to Zenith. TV, radio and magazines will also see negative growth, with local TV, which relies on auto ads for about 25% of their income, to slip 12% in 2009.

The ad industry’s struggles are being compounded by the auto industry, the largest category of advertiser and a segment which typically spends nearly $20 billion a year on ads, writes The New York Times. As automakers face their worst sales figures in decades, their reduction in ad spending is fueling the downward revisions of forecasters. “A lot of dealer spending is linked directly to sales,” Tim Jones, chief executive for North America at ZenithOptimedia, is quoted as saying. “If they’re not selling cars, they cut spending.”

The auto industry’s retrenching could lead to the need for the ad industry to rethink itself, says Chris Foster, chief executive for North American ops at Fallon Worldwide, part of the SFF Group division of Publicis. Foster points out that the downsizing of agency-sustaining types of business like autos will “force agencies to do great work - or die.”

This could mean there are opportunities for start-ups, particularly those that are more comfortable with social media and other new ways of reaching consumers. Acquisition opportunities, for those with capital, are also likely to abound.

Meanwhile, outdoor, including cinema, and online will continue to grow. Internet growth will be at 21.1% in 2008 - a number which was not downgraded in this report. In 2009, it will grow 18.1%, per Zenith. GroupM predicts internet ad spending will jump 16% this year and just 5% in 2009.

Last week, Merrill Lynch predicted a 4.2% drop in U.S. ad spending in 2008 and a 5% drop in 2009. Global ad spending will grow 0.4% this year, followed by a 1.6% slip in 2009, in large part due to a 15% drop in auto spending next year (via Bloomberg).