When you sit down and reflect upon the latest predictions on global advertising spend, there is a dawning realization that the world of advertising is changing irrevocably as sales fall off a cliff. Not to say that the rise and rise of internet advertising, the imminent ascent of mobile advertising, the invention of addressable advertising and the recent emergence of in-game opportunities isn’t change enough for advertising to cope with ‘ but it’s changing even more than that.
The US market will make up less and less of the global advertising market, the internet is about to overtake everything except TV and maybe one day that a well, and the trends confirm that newspapers are dying, and will continue to struggle; magazines are slowly going the same way, as is radio. The winners appear to be, according to advertising researcher Zenith Optimedia, outdoor, the internet and TV. The segments on mobile and in-game are too small for the researcher to notice right now, but our bet would be they would make an appearance in the not too distant future.
All of this is contained in a report which says that the world’s advertising spend will fall by only by 0.2% during 2009. That statement on its own would get most people off their chairs whooping and hollering with delight. You might have expected falls of closer to 6% if you had listened to all the doom and gloom of the US media or the past 6 months. If so, you’d be right.
One of the things which makes a global fall of 0.2% look ominous is understanding that in some markets there has, until now, been very little in the way of advertising. These are places like Central and Eastern Europe, Latin America and China and India which will respectively have percentage increases of 1.5%, 14.9% and 3.2%, with the last figure being for all of Asia Pacific (so the increases in China and India are individually significantly larger in percentage terms at 9% in China and 13% in India). Africa and the Middle East and the rest of the world is growing at roughly 11.2% per annum. Which means that all of the shrinkage is being predicted in the US, with a tiny bit more in Western Europe. Zenith Optimedia thinks that everywhere else will see advertising growth. That means a fall of 5% to 6% in the US, and a two year grind to gradually replace the advertising that is lost. The US will not be as big as the 2007 advertising market until 2011. Even so this is the biggest fall in advertising since 2001, despite revenues being artificially held up by new markets opening.
There is one other concern that worries us and it is in the fine print of the Zenith Optimedia research process over how it is calculated. It uses currency conversion from one country’s advertising to the $ figure it gives, based on an average for 2007. The increased strength of the major currencies will give a falsely weak figure in many of the newer markets when they actually report, temporarily making the US, Europe and Japan look stronger, but when the currency strength unravels after the recession, it will swing stronger in the other direction making the US look weaker still.
However we have to take what Zenith Optimedia says with a punch of salt, because this is from a company which put out a report in October that the world’s ad spend was to grow by 4% during 2008. It has now adjusted that to 1.3% as advertising spend in the fourth quarter fell off a cliff. The report suggests that things will all get back to normal in the 3rd quarter 2009, pretty much when everyone is saying the recession will recede. But there is the potential for the recession to sweep across from the US, around the world, and for ALL of these markets to fall during 2009. In which case we will be looking at even more changes in advertising.