Forecasters Predict Negative Turn for ’09 Ad Spend

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

ZenithOptimedia 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 is also predicts declines. In the U.S., spending will be down about three 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 (Dec. 8).

The Magna forecast wasn’t available at deadline, but Nick Brien, global CEO of Mediabrands, the IPG media management arm, told Reuters last Thursday that based on current conditions, the firm’s forecasters were expecting “modest declines” in ad spending in 2009.
 
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 2009-2011 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 escaping 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, dotcom-driven ad growth of 15 percent.

Highlights of the study will be presented today at the UBS Media Conference in 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.