Search »

Zenith Drastically Cuts Ad Spend Predictions; Some Call New Forecast ‘Optimistic’

ZenithOptimedia has slashed its U.S. ad growth forecast by more than half, in the first major ad spending revision since the financial crisis began escalating in recent weeks.

U.S. advertising will grow 1.6 percent in 2008 and just 0.7 percent in 2009, Zenith predicts, down from its June forecast of 3.4 percent in 2008 and 2.6 percent in 2009, writes MediaPost.

Zenith also lowered its global ad growth estimates, from its June predictions of 6.6 percent in 2008 and 6.0 percent in 2009 to 4.3 percent and 4.0 percent, respectively. (View table of major media ad spend, year-on-year change from 2005-2010.)

The reason for the reduced estimates is the financial shock caused by the bank failures, Zenith said. Though they will only have a slight direct impact on spending, because financial advertising is only about 4 percent of total global ad spend, companies will be looking more closely at their ad budgets to find cost savings as consumer continue to tighten their belts.

Online’s share of the global ad market is expected to increase, from 8.6 percent in 2007 to 13.8 percent in 2010, according to the new forecast (via paidContent). That rise will come as traditional media shrinks due to the current economic pressures. (View table of ad spend share by medium, ‘06-‘10.)

Global internet ad spend will hit $51.1 billion this year, 61.7 billion in 2009, and $75.8 billion in 2010, according to the report, writes ClickZ. (See table of ad expenditure by region.)

Barclays Capital (formerly Lehman Brothers) analyst Doug Anmuth predicts that online ad spend will grow 16.9 percent between 2008 and 2012, down from his previous forecast of 23.4 percent. He expects that online will account for 13 percent of total U.S. ad dollars by 2011.

Veteran media industry analyst Jack Myers warns that ZenithOptimedia’s forecast may be too optimistic. He sees no potential for growth, saying that the ad industry cannot assume that this recession will see advertisers increasing their budgets in the hopes of gaining market share, as they have in the past. He predicts that over the next three years, “names in our business as legendary as Lehman Brothers was in the financial industry will be declaring bankruptcy and closing their doors.”

Other ad agency execs feel the same, according to the Wall Street Journal (subscription). Nick Brien, CEO of IPG’s Mediabrands, calls next year - without the boost from Olympics or election spending, and with the impact of what’s happening on Wall Street filtering down - “scary.”