Spain Drags Down Global Ad-Spending Forecasts

ZenithOptimedia, MagnaGlobal Revise Predictions Downward in Europe, Though Emerging Markets Remain Bright Spots

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In ad-spending forecasts from ZenithOptimedia and MagnaGlobal, fears related to Spain's weakening economy sunk predictions for the Eurozone and overall global growth.

Publicis Groupe 's ZenithOptimedia is forecasting that global ad spending will reach $502 billion in 2012, a downgrade to 4.3% growth from 4.8% it predicted in March, while Interpublic Group of Cos.' MagnaGlobal is reducing its 2012 ad growth forecast 4.8% from the 5% growth it predicted in December 2011.

MagnaGlobal's growth numbers are based on a global ad market expected to reach $480 billion this year, and a U.S. market accounting for $152 billion.

Just prior to releasing its report, ZenithOptimedia adjusted its growth prediction for Spain from -5.3% to -12%. As a result, the agency adjusted its predictions for the eurozone in 2012 to -1.1% from -0.4%. It also reduced its calculations for Western Europe to 0.4% from up 0.9% -- pretty grim considering the 1.5% growth the agency had predicted for the region back in March. These late adjustments also revised total global ad-spending growth downward to 4.3% from 4.4%.

According to MagnaGlobal's study, "In Spain, this year's predicted drop of -8.4% will be the fourth year of downturn in the last five years; at the end of 2012, the Spanish market will be 37% smaller than its pre-slowdown level in 2007."

Aside from Spain, ad spending in Italy (-5.0%), Portugal (-10.4%) and Greece (-19.5%) is shrinking "as local advertisers struggle to maintain their cash reserves, and international advertisers reconsider the long-term potential of their investments," according to the ZenithOptimedia report. It added that ad spending should be flat everywhere else in the Eurozone, but in Austria (3.9%), Finland (3.2%) and Germany (2.1%) it's growing at about the rate of inflation.

"The eurozone is weighing down our predictions for Europe as a whole," the forecast stated. However, it doesn't expect the eurozone to meet disaster, "such as a break-up of the euro," this year. "On this basis, we predict eurozone ad spend will grow 2.3% in 2013 and 3.0% in 2014."

ZenithOptimedia also dropped Asia Pacific to 6.7% growth from 7.4% growth, and Latin America to 7.8% from 9.2%. In North America, spending growth holds steady at 3.6%. Growth in the Middle East and North Africa also remains steady at a low 1%, due to continued political and social unrest, the report noted.

A more positive outlook shows that global growth forecasts for 2013 and 2014 remain unchanged, at 5.3% and 6.1%, respectively. Between 2011 and 2014, developing markets (defined as everywhere outside North America, Western Europe and Japan) are set to increase their share of the global ad market from 32.8% to 36 .7%. Half of that growth will come from 10 developing markets. Beyond Brazil, Russia, India and China, which are expected to account for 35% of global growth, six developing markets set to deliver 15% of global growth include: Indonesia, Argentina, South Africa, South Korea, Thailand and Turkey.

In ZenithOptimedia's forecast by medium, internet showed the most promise, with ad spending set to rise to 21.5% in 2014 from 16% in 2011. Display is the fastest-growing subcategory, with 20% annual growth. Social and video, it noted, are driving growth. For example, the report stated that paid ads appearing within social-media sites like Facebook, Twitter and LinkedIn accounted for 14.4% of internet display in 2011. Additionally, the firm expects that internet advertising will account for 55% of the growth in total spending over the next three years.

The next biggest category is TV; the firm expects it will contribute 42% of growth. Newspaper advertising will continue to shrink an average 1.2% a year, but magazine advertising should stabilize in 2014, the firm predicted.

MagnaGlobal expects TV spending to grow by 5.2% and remain the No. 1 medium globally. According to the firm, the media will benefit from the "quadrennial" events of 2012, including the Olympics in the U.K. It predicts that internet advertising will grow 13.5% to nearly $100 billion. Internet is set to be the second-biggest media, outgrowing newspapers and reaching a 20.3% global market share.

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