Forecasts for 2012 Ad Spending Revised Downward

Separate Reports by ZenithOptimedia and Group M Both Say We'll See Less Robust Spending Growth Going into New Year

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Thanks to strong performance in emerging markets and events like the Olympics and U.S. presidential election, ad spending is expected to see single-digital growth next year. However, two firms--Publicis Groupe 's ZenithOptimedia and WPP's Group M--are now getting more conservative in their predictions about the business in 2012, and have revised global forecasts down slightly from earlier this year.

The latest forecast by ZenithOptimedia, which will be released December 5, shows that global ad spending in major media will grow 4.7% to $486 billion in 2012, 5.2% in 2013 and 5.8% in 2014.

That's a dip from what it said in October, when the company released its last forecast. At that time the media agency predicted 5.3% growth for 2012. The agency also predicts that spending will end this year at $464 billion, 3.5% higher than in 2010.

Separately, Group M says it expects a 6.4% increase in global ad spending in 2012, which is down from a July report forecasting a 6.8% increase. Its new report, also released December 5, predicts that 2011 will show a 5% increase in spending over 2010, to $490 billion.

Europe's debt crisis has hampered global ad spending, but both agencies cited the summer Olympics and U.S. presidential election as major drivers for growth next year. They also note Japan's relatively speedy recovery from its March earthquake that disrupted spending throughout the region. The recovery, notes ZenithOptimedia, will add $7 billion to ad expenditure in 2012. The agency expects spending in Japan to grow 3.1% next year, but after the "one-off stimulus" it predicts that growth will fall back to 1.9% in 2013 and 2.5% in 2014.

ZenithOptimedia forecasts 3.5% growth in U.S. ad expenditure in 2012, 3.7% in 2013 and 4.3% in 2014, versus a 2.2% increase in 2011. This outlook is in part the result of strong U.S. retail sales, which grew 7% in October and got a nice bump from record Black Friday sales of $11.4 billion, the agency said. For the U.S. market, Group M's report predicted a 3.3% increase in 2011 and a 4% hike in 2012.

According to Zenith, in the U.S. in 2011, the largest increases in spend were in internet (12.6%) and cable TV (12.0%). The firm reports decreases for newspapers (-8.5%), business magazines (-4.0%), network TV (-2.0%) and syndication (-4.0%). And marketing services grew 1.9%.

Despite the dark cloud over Western Europe, Zenith notes that advertisers are somewhat armed against existing uncertainty in the region. Coming out of 2008, marketers built up large cash reserves, the report notes.

Europe is expected to grow by 2.0% in 2012, 2.8% in 2013 and 3.3% in 2014, according to ZenithOptimedia. "We estimate that a default in two eurozone countries, coupled with deeper recession in the eurozone and other Western European markets, would bring growth in Western Europe down to -4.0%, but global ad expenditure would still grow by 3.2%," ZenithOptimedia states in the report.

Forecasted by ZenithOptimedia to contribute 58% of new ad dollars over the next three years, the developing markets show the most potential. Asia Pacific (excluding Japan) is expected to grow by an average of 10.4% a year.

That compares to predicted growth in Central & Eastern Europe of 9.6% a year and in Latin America of 7.3% a year. Meanwhile political unrest in the Middle East & North Africa will cause spending in the region to remain slow, the report says, at an average of 1.3% over the next few years.

One of the most striking statistics in ZenithOptimedia's report was this one: over the next three years, nearly half (48%) of all the world's growth in ad expenditure will come from just ten emerging markets. The four BRIC markets alone (Brazil, Russia, India and China) are expected to account for 33% of global growth.

Globally, Group M reports that measured digital media investment is expected to grow by 43% in 2012.

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