Weak economy forces revised ad forecasts

By Published on .

As the economy falters, several major research and media companies have lowered their ad forecasts for the year, bringing them closer in line with revised spending by marketers. Among those that have recently revised their forecasts are Carat, JPMorgan Chase & Co. and eMarketer.

Advertisers themselves are lowering budget projections for the year. A survey released last month by the Association of National Advertisers found that 53% of advertisers expect their ad budgets to be reduced in the next six months as a result of the tough economic climate. The report was based on an online survey of more than 100 advertisers conducted in late July and early August.

The survey also found that 87% of advertisers are planning cost savings or reductions within their current marketing and advertising efforts.

Among those budget areas being reduced are: advertising campaign media budgets (69%), advertising campaign production budgets (63%), new projects (61%) and departmental travel and expenses (63%).

"Historically, marketing budgets are among the first to be cut in a budget crunch, but marketers should be cautious about trying to find a quick fix," said Bob Liodice, president-CEO of the ANA.

Smarter decisions needed

"Marketers need to make far smarter decisions about marketing investments than ever before and, hopefully, influence CEOs and CFOs to not cut as drastically as before. Marketers need to invest strategically and tactically to make sure their brands remain strong. When marketers do increase spending and do it in the right way, they can gain share of market."

Earlier this month, media agency Carat revised its global ad spending forecast to 4.9% growth this year, down from a March growth projection of 6.0%. Carat cited the weak economy for the revision downward. In North America, total ad spending is expected to grow 2.1% this year, down from the 3.8% growth forecast in March. Carat also lowered its global ad spending forecast for next year to 4.9% growth, down from an earlier projection of 4.8% growth.

Researchers have also lowered forecasts for online ad spending this year.

Internet research firm eMarketer now projects that U.S. online advertising will total $24.9 billion this year, up 17.4% over last year. That is down from an earlier projection of $25.9 billion, or 22.7% growth over last year.

"Growth is still very strong—just not as strong as expected," said David Hallerman, senior analyst at eMarketer. "The key factors behind that are mainly economic."

A particular bright spot is online video advertising, which will total $505 million this year, up 55.9% over last year, according to eMarketer. Next year, online video ad spending will reach $750 million, up 48.5% over this year, the report projects.

"Next year, there will be slightly slower growth, due to the still-struggling economy and the fact that advertisers are still working out the best ways to do online video ads," Hallerman said.

However, growth is expected to pick up significantly by 2012, when spending on online video ads will reach $3.4 billion, up 79% over spending in 2011, according to eMarketer.

"A large part of the growth will come from traditional advertisers who are looking for something familiar, with enough reach to give it some emulation of television," Hallerman said. "As we see more professionally produced video content—whether it's existing TV shows or content just for the Web—it will support larger ad spends."

Also this month, JPMorgan Chase & Co. lowered its forecast for online display advertising and search advertising, citing macroeconomic weakness.

The investment bank cut its online display ad forecast in the U.S. to $8.2 billion this year, which is still an increase of 14% over last year. In an earlier projection, JPMorgan Chase forecast online display advertising would total $8.6 billion, up 20% over last year.

"We expect the biggest area of weakness will be display advertising," said JPMorgan analyst Imran Kahn in the report. "As advertisers become more conservative with their ad spend, we think that the long-tail advertisers will shift toward performance-based advertising forms."

However, the economic conditions are also spilling into search advertising, Kahn said. JPMorgan now projects search advertising will grow 27% this year, down from an earlier projection of 32% growth.

"We see the growth rate recovering in fiscal 2009 as the economy turns and as we expect the market share increases to stick. Thus, we are now modeling U.S. search growth of 26% for fiscal 2009," Kahn said.

Most Popular
In this article: