Online grows despite woes

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Citing recent economic turmoil and continued sluggishness in consumer and manufacturing spending, media forecasters have downgraded their projections for overall ad spending next year. However, online remains a bright spot for the next several years, according to recently released reports. Last month, Magna Global and Zenith-Optimedia issued revised ad spending forecasts reducing earlier projections. Magna Global, a division of IPG Mediabrands, said U.S. ad spending would grow by 2.9% next year, down from its June forecast of 4.8% growth. Its forecast for growth this year over last year remained unchanged, at 1.6%. “We were cautious from the beginning, forecasting weak single-digit growth, and we felt we did not need to readjust that,” said Vincent Letang, exec VP-director of global forecasting at Magna Global, referring to the company's forecast for this year. Regarding the downgrading of next year's U.S. ad spending forecast, Letang said, “It's no secret it is [due to] concerns about the U.S. economy. Personal consumption in particular is under pressure. We also know from experience that companies tend to cut marketing expenditures and advertising expenditures when sales go down or are expected to go down.” Letang also noted the high level of U.S. unemployment, which is projected to remain high next year and influence the purchase of big-ticket items such as automobiles. Next year, the fastest-growing ad medium will be online, with a projected spending increase of 11.6% over this year, according to Magna Global. TV spot revenue will grow 7.1%, benefiting from political and Olympic advertising, Letang said. Also last month, ZenithOptimedia, citing a slowdown in economic growth and recent market turmoil, revised its global ad spending forecast to a 3.6% increase for this year, down from its July forecast of 4.1%. It also revised its global ad spending forecast for next year down slightly, to 5.3% growth, from its earlier forecast of 5.9% growth. ZenithOptimedia projected U.S. ad spending will grow 2.2% this year, a slight increase over its July forecast of 2.1% growth. “The slowdown in economic recovery in developed markets, coupled with rising fears of a double-dip recession, have caused some advertisers to trim back budget increases planned for the end of 2011; but there has been no sign of the canceled campaigns and sharp budget cuts that signaled the beginning of the last advertising downturn in 2008,” ZenithOptimedia said in its report. Internet ad spending will grow at an average rate of 14.6% a year between 2010 and 2013, according to ZenithOptimedia. Within Internet ad spending, display advertising is the fastest-growing segment, increasing at an average rate of 17.2% a year, according to the report. Display advertising is benefiting from streaming video ads as well as from ads on social media sites, ZenithOptimedia said. Also last month, Internet research company eMarketer released a revision to its mobile advertising forecast, projecting that U.S. mobile ad spending will total $1.2 billion this year, up 62% over last year. By 2014, U.S. mobile ad spending will reach $3.4 billion, eMarketer said. In September 2010, eMarketer forecast U.S. mobile ad spending would total $2.5 billion in 2014. The revised forecast reflects the rising adoption rate for smartphones and the resulting mobile Internet usage. By the end of this year, eMarketer estimated 38% of U.S. mobile users will own a smartphone. “You are starting to see a shift toward search and display ads [on mobile devices], much like you saw with the desktop,” said Noah Elkin, principal analyst at eMarketer. “Marketers are trying to do more to capture users' interest on mobile devices and are trying to replicate the rich experiences they've had on the desktop with smartphones and tablets.” This year, overall Internet ad spending will total $31.3 billion, up 20.2% over last year, eMarketer said in a June report, which it has not revised. Next year, online spending will hit $36.8 billion, up 17.6% over this year, and by 2015 total online ad spending will reach almost $50 billion. “Even in a down economy, digital tends to benefit even when traditional advertising suffers,” Elkin said. “The accountability and perceived ROI that marketers get from these digital venues are seen as producing a greater return [than with traditional advertising].”
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