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Modest Ad Growth Ahead

A full recovery could take a year or more.

For the global advertising economy, the worst of the recession appears to be over, although a full recovery will take years, not months, according to new ad spending forecasts from WPP's GroupM and Publicis Groupe's Zenith Optimedia.

Company executives will present the forecasts at a Tuesday morning session at the UBS media conference in New York.

The forecasts both predict a very modest return to worldwide spending growth in 2010 -- less than 1 percent -- after a sharp drop in the level of expenditures this year. Both companies upwardly revised their global spending predictions from just a few months ago.

That said, the recovery would take longer in some markets, per the forecasts. Both GroupM and ZO foresee further spending declines in North America and Western Europe next year, although the decreases are expected to be significantly smaller than the sharp falloffs occurring this year.

Globally, GroupM is now predicting a 0.8 percent improvement in spending for 2010 to $448 billion, after an almost 7 percent decline this year to $445 billion. The new prediction is a reversal from June, when the media agency firm believed that spending would continue its downward projection next year by another 1.4 percent.

But prospects for an ad recovery have improved since that last forecast, said GroupM futures director Adam Smith. "There are signs from around the world of confidence returning to the financial services and automotive sectors, which have been hit hardest, though this has yet to translate into bigger marketing appropriations," he said. The consumer goods, personal care and telecommunications categories are in reasonably healthy shape from an ad spend perspective, said Smith. But, he cautioned, "marketers everywhere, particularly in the U.S. and Western Europe, are looking for further savings and more value from media markets in 2010."

Meanwhile, ZO now predicts a 0.9 percent uptick in global spending next year to almost $448 billion, after a steep 10.2 percent decrease to nearly $444 billion for 2009. ZO's new outlook for next year is a little rosier than the half-percentage point gain it predicted in October. "We expect the recovery to strengthen steadily as corporate and consumer confidence continue to improve," the agency network said.

But both shops say that North America and Western Europe will be laggards while Latin America and Asia will show greater near-term growth.

GroupM predicts that spending in North America will drop another 4 percent in 2010 to about $150 billion, after a much sharper nearly 8 percent drop-off this year to almost $156 billion. ZO believes a similar pattern will occur, with a spending decline for the region next year of just 2.4 percent to $153 billion, much improved from this year's 12.7 percent plunge to about $157 billion.

A similar trend is expected for Western Europe, with GroupM forecasting a 1.6 percent decline next year to almost $105 billion, greatly improved from the 12.8 percent spending dive the region will experience in 2009. The ZO outlook for the region is similar: down 0.5 percent to a little more than $106.2 billion in 2010 versus an 11.8 percent decline this year to $106.8 billion.

GroupM says that Latin America will return to double-digit growth next year with an increase of 10.5 percent to nearly $27 billion, an improvement over the 7 percent gain the region will garner this year to $24.3 billion. For the Asia-Pacific region, spending will return to positive territory with 5.3 percent growth next year to nearly $134 billion after dropping 0.4 percent in 2009 to roughly $127 billion.

ZO predicts a similar trend for the two regions, with Latin America growing more than 8 percent next year after a slight 0.3 percent uptick this year, while Asia-Pacific will climb nearly 4 percent in 2010 after a 3.1 percent drop this year.

By medium, ZO reports that the Internet will be the only medium to grow global ad spending in 2009 -- by 9.5 percent. "In a time when marketing departments have to justify every dollar they spend, the rapid and clear returns offered by Internet advertising are more attractive than the longer-term brand-building benefits offered by other media," ZO said. And next year, spending in the medium will increase further -- by 12 to 13 percent, the agency net said.

By comparison, newspaper spending will plummet 18 percent this year to $102 billion; magazines will plunge 20 percent to $45 billion; and TV will slide 8 percent to nearly $172 billion. Newspapers and magazines will each see about a 1 percent decline in 2011, while TV is expected to rebound with 4.6 percent growth to almost $183 billion, ZO predicts.

— Nielsen Business Media