Worldwide ad spending will show modest gains next year as the economy slowly recovers and marketers invest in newer channels such as social media, according to the 36th annual “Advertising Ratios & Budgets” report, released last month by research company Schonfeld & Associates.
Other ad forecasters, including MagnaGlobal and Zenith Optimedia, issued revised ad forecasts that project slight gains in global ad spending this year and next.
The Schonfeld report forecasts ad spending and provides estimates of ad-to-sales ratios for more than 4,500 companies in 320 industry segments. The data are gathered from publicly reported information and analyzed using a proprietary forecasting model. The report includes information on total advertising and promotional spending, in addition to measured media.
“It looks like we're no longer on the downward trend—a lot of industries have recovered to their spending levels from before [the downturn], particularly the automotive industry, which had some significant declines,” said Carol Greenhut, president of Schonfeld & Associates. “Overall, 2013 promises to be a year of continuing recovery in ad spending.”
Although Schonfeld does not break out spending by media, Greenhut noted that many marketers are increasing their spending in such newer channels as social media to engage with customers. “Money spent in nurturing a social media presence provides two-way communication with customers, helping to build and maintain brand loyalty,” she said.
The report breaks out ad spending by SIC (standard industrial classification) number.
The top-spending industry next year will be automotive at $41.2 billion, up 9.1% over this year, according to Schonfeld estimates. The second biggest spender will be the pharmaceutical industry ($28.8 billion, up 7.5%), followed by diversified food companies ($25.0 billion, down 1.0%); wireless telecommunications companies ($22.1 billion, up 5.1%) and telecommunications providers excluding wireless ($21.9 billion, up 6.5%).
Rounding out the top 10 are: perfume and cosmetics ($14.8 billion, up 4.0%); computer programming and data processing ($14.1 billion, up 11.4%); diversified multimedia ($11.8 billion, up 2.8%); soap and detergent ($11.5 billion, up 2.8%); and prepackaged software ($9.9 billion, up 8.6%).
The Schonfeld report also estimates advertising-to-sales ratios by industry (ad spending as a percent of total sales). The industry with the highest ad-to-sales ratio this year is perfume and cosmetics (20.0%), followed by soap and detergent (12.1%), food products (9.2%), diversified multimedia (8.6%), computer programming and data processing (4.8%), pharmaceuticals (4.2%), prepackaged software (3.5%), wireless telecommunications (2.8%), telecommunications excluding wireless (2.7%) and automotive (2.5%).
In two separate forecasts released last month, media agencies Zenith Optimedia and MagnaGlobal revised their global ad predictions for this year and next, citing still-shaky world economic conditions as a factor in those projections.
Zenith Optimedia, London, said global ad spending will reach $502.0 billion this year, up 4.3% over last year. That forecast was down from a projection of 4.8% released in March.
“The ad market slowed in April and May as advertisers became more cautious about the state of the global economy,” Zenith Optimedia said in the report. “The Greek elections have revived fears of a eurozone breakup, causing investors to withdraw from risky assets. Partly as a result, economic growth has slowed across the developed world, and recessions have deepened in the southern eurozone.”
However, the forecaster said it assumes the eurozone will avoid an economic disaster this year, “followed by slow but steady economic improvement.”
In North America, ad spending will reach $171.2 billion this year, up 3.6%. That was unchanged from the March forecast.
Zenith Optimedia did not revise its forecast for next year, when global ad spending is expected to grow 5.3%.
MagnaGlobal, New York, said global ad revenue will total $480.0 billion this year, up 4.8% over last year. The forecast was down slightly from a December prediction of 5.0% growth this year.
The media forecaster attributed the downgrade to Western Europe's “shaky economy.” In North America, ad spending is expected to reach $165.0 billion this year, up 3.9% over last year and a revision from the 3.7% growth MagnaGlobal predicted in December.
For next year, MagnaGlobal is expecting a slightly lower growth (4.5%), followed by a reacceleration in 2014-16, based on macroeconomic forecasts.