Japan Nuke Disaster, Middle East Upheaval Take Toll on Ad Spending

Digital Sector to Exceed $100 Billion in Spending Next Year

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Group M has revised down its forecast for 2011 ad growth to 4.8% from 5.8% -- a gloomy outlook it attributes in large part to natural disasters in Japan and political upheaval in the Middle East.

What does the decrease mean? That marketers' measured media spending would hit $506 billion, compared to $483 billion in 2010, when the market was still reeling from the impact of the recession.

In a statement, Group M Futures Director Adam Smith said the 2011 forecast for Japan -- distressed by an earthquake and tsunami of "rare scale" -- dropped from an anticipated 3% growth to a 5% decrease, a difference of $4 billion of global spending. Upheaval in the Middle East is contributing to an expected $1.2 billion loss in that region in 2011.

There is some good news contained in forecast, though; spending in 2012 is expected to reach as much as $540.3 billion, a 6.8% increase over this year. Group M predicts the ad market will rise due to the next year's summer Olympics and the 2012 U.S. political campaigns and elections.

In the U.S., 2011 spending is expected to hit $148 billion, a 3.8% increase over 2010. 2012 U.S. ad spending should reach $154 billion, a 4.2% hike.

"Without the election, U.S. ad growth in 2012 would probably be slower than what we are predicting for 2011," said Group M Chief Investment Officer Rino Scanzoni. "The elections make heavy use of local TV and radio, so national media may well find 2012 is slower-going in any case. As for the summer Olympics, the broadcasts will attract substantial advertising investment, but the majority of this will be displaced rather than new funds."

The report, which the WPP unit conducts twice a year, highlights a heightened role for measured digital advertising, which it expects will account for 17% of global advertising in 2011. That's an uptick of 1% over its forecast in December 2010. The sector is growing at an estimated 15% to 16% annually and will exceed $100 billion worldwide in 2012, Group M reported.

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