Forecasters See Ad-Spend Slide in ’09

NEW YORK Forecasters at three agency holding companies are now predicting that ad spending will take a negative turn in 2009.

Zenith Optimedia has slashed its outlook for ad spending next year, citing the spreading financial crisis, shaken consumer and corporate confidence and uncertainty about the future.
 
The Publicis-owned shop is now calling for year-over-year ad spending in major media to decline 5.7 percent in North America and 1 percent in Western Europe, down from its previous forecasts of just two months ago of 0.9 percent and 2.6 percent growth, respectively. ZO expects global spending to be down slightly in 2009, by about $1 billion (0.2 percent) to $490.5 billion.

A new forecast from WPP’s GroupM also predicts declines. In the U.S., spending will be down about 3 percent to $157 billion. Like ZO, GroupM predicts a 0.2 percent drop worldwide, after a 2.6 percent global ad spending gain in 2008.

Both shops, along with Interpublic’s Magna, will present their updated forecasts at the UBS Global Media and Communications Conference in New York today.

The Magna forecast calls for a 4.5 percent decline in U.S. ad spending next year, a sharp downward revision from the firm’s June outlook that predicted 3 percent growth in the sector. Magna also cut back its projection for ad growth in overseas markets from 4.6 percent to 2.7 percent. Its total global ad spending outlook for next year is in line with GroupM and ZO: down 0.3 percent.

Magna also cut its U.S. 2008 forecast from growth of 2 percent to a decline of 3.2 percent. But as Nick Brien, CEO of IPG’s Mediabrands told Reuters last week, economic conditions are so volatile right now that predictions about future ad spending are practically out of date as soon as they are issued. “I’ve got forecasters looking at this on a daily basis, it’s moving so fast,” Brien said. “A month ago, I would have said flat spending year-on-year, and now we’re looking at a modest decline.”

In his forecast, Robert Coen, svp and director of forecasting at Magna, said, “Until consumers start spending more and marketers become confident that sales of their products are recovering they will not loosen the tight controls on their budgets and will also hold down the size of their workforces.” Coen said he expects a recovery in U.S. ad budgets to begin in 2010.

The ZO forecast predicts the first half of 2009 will be the toughest, with a mild recovery starting in the third quarter and picking up in the fourth before the spending rate turns positive in 2010. ZO calls for worldwide ad spending to advance 5.5 percent in 2010 and 5.8 percent in 2011, with growth in developing regions like Latin America, Africa and the Middle East far outpacing that of North America and other developed markets.

 
Looking at ad spending by medium, newspapers, magazines and radio will continue to lose share over the 2009-11 period, per the forecast. The Internet is expected to be the big winner as advertisers turn to digital media for its innovation and accountability. Total online advertising is forecast to advance 18 percent in 2009, with the category capturing a 15.6 percent share in 2011, up from 12.1 percent in 2009.

Similarly, GroupM predicts that Internet ad spending will be the biggest growth area next year, but isn’t as bullish as ZO on the rate of growth. GroupM is predicting a modest 5 percent Internet spending gain next year, versus 16 percent growth in 2008.

According to ZO, also expected to grow share next year are television, with its familiar power to build brands; outdoor, for its ability to capture consumers’ attention with big billboards; and cinema, as consumers flock to the movies as a means of escape in tough economic times.
 
GroupM notes that the projected overall decline is the first retreat in global advertising since the 3 percent fall recorded in 2001 after 2000’s extraordinary, dot-com-driven ad growth of 15 percent.

Highlights of the study will be presented today at the UBS Media Conference by GroupM futures director Adam Smith.  “Advertisers are scrutinizing every penny,” said Smith. “The automotive and financial services categories have obviously seen weakness across 2008, and retail will be under pressure as we move beyond its busiest fourth quarter into 2009.  Among our own client base we are not seeing wholesale cancellations, but we are seeing migration from expensive and less-tried-and-true media to value and certainty.”

ZO global CEO Steve King will present highlights of the shop’s forecast at the UBS conference. Robert Coen, svp and director of forecasting at Magna, will present that shop’s latest findings.