Other morsels divined at a breakfast-hour presentation today include that print, despite remarkable innovation in some markets, will continue to diminish as a source of media-spending growth globally, and the internet, which in recent years has grown at a breakneck pace comparatively, is "largely the preserve of the West," in Mr. Smith's opinion.
His talk was the first portion in a weeklong media conference organized by investment bank Credit Suisse.
Mr. Smith, who joined WPP last January from Publicis Groupe's ZenithOptimedia Group, predicted global media-spending growth rates will remain essentially flat in 2007. This year media spending will be up 5.3% from 2005 at $395 billion; next year he predicted another increase, but not at the same rate, as media spending will jump 5% over this year to reach $414 billion.
China's investment in major media in 2006 will rise to $4.2 billion vs. the U.S.'s $4 billion.
In the U.S., Mr. Smith anticipates media growth in 2006 will rise a modest 2.7% over last year to $151 billion, but for 2007 the increase will be an even more modest 2.4% to $154 billion.
TV's role in growing economies
Globally, TV is "by far the largest source of media growth, and the predominant source of growth in emerging economies, while the internet is picking up," said Mr. Smith. Print, which he calls "extremely competitive and innovative," is "managing to hang on to reach" in certain sectors, such as weekly magazines and free commuter dailies in Western Europe, but the medium is having difficulty in securing price advantages. Publishers continue to introduce new titles but subscription prices are declining. "Advertisers have no inflation in many if not most print sectors," he said.
The internet's contribution to world media growth is holding steady -- 27% in 2006, expected to be 28% next year -- and the big question, in Mr. Smith's opinion, is just how vigorous the next wave of growth in Internet advertising spending will be. "Where will the growth come from? Will it be big advertisers, like Unilever or Kellogg?" he asked.
TV continues to be the biggest medium globally, garnering half of all media investment growth. In North Asia, TV is still the largest source of media growth, and a key agency skill in the market is "price analysis," Mr. Smith said.
Internet spending in Europe
In Western Europe, dollars continue to shift from TV to the internet, and in the U.K. specifically, the internet is "pretty much the only source of revenue growth," Mr. Smith said, noting that the "direct response people have made hay with that."
The U.K., in fact, leads Western Europe and the U.S. in share of internet spending, including search, but Mr. Smith's analysis showed "we've reached a watershed. Will we see double-digit growth rate of 30% or 40% again?"
He believes growth will continue because of attributes such as accountability; consumers' quest for entertainment and information; the continued increase in broadband penetration; and e-commerce, but barriers remain. Marketers and agencies alike "have an attachment to traditional media," Mr. Smith said, and there is a lack of understanding in how digital can help big advertisers, particularly those in package goods.
"We don't know enough," Mr. Smith said. "Not every brand will make it online."