Initiative Study: ‘New World Order’ in Global Adspend

A report set to be released this week from Initiative predicts “healthy” global growth of 5.8 percent in advertising expenditures this year, and reveals that China has surpassed Germany as the world’s third-largest advertising economy.

In the global-adspend study “Spheres of Influence 2004,” Initiative Futures Worldwide—a unit of Interpublic Group’s Initiative—forecasts that U.S. ad expenditures will rise by 4.9 percent this year over 2003, reaching nearly $155 billion. The report predicts a rise of 5.8 percent across the 44 global markets surveyed, to $331.4 billion by the end of the year.

While noting that 2003 was a difficult year in many respects—with the spread of SARS and the outbreak of the war in Iraq—the report says these factors had little effect on ad spending.

“2004 shows healthy growth for the global advertising economy,” said Sue Moseley, managing director of Initiative Futures Worldwide in London, who spearheaded the second annual study. She noted, however, that after taking inflation into account, spending would be only marginally higher than the peak reached in 2000.

Initiative’s global forecast is lower than the estimates of the industry’s most prominent prognosticators: In December, Bob Coen, svp of forecasting for IPG’s Universal McCann, predicted a worldwide increase of almost 6 percent this year; John Perriss, CEO of Publicis Groupe’s ZenithOptimedia, forecast a rise of just less than 5 percent.

Looking at the Top 5 markets, Moseley noted that “there is a new world order.” With a boom in China and relative stagnation in Germany, China is now the world’s third-largest advertising economy. Just four years ago, Moseley noted, China was the sixth largest advertising market. With 15 percent growth—to nearly $23 billion—expected this year, China is the only Top 5 market set for a double-digit increase in 2004.

Initiative anticipates that within the next few years, Asia will overtake Western Europe as the second-largest advertising region. The No. 1 market, the U.S., accounts for nearly half of the world’s ad expenditures.

Among the other Top 5 markets, No. 2 Japan is expected to see 4.1 percent growth to almost $38 billion. Initiative forecasts that No. 4 market Germany will achieve a modest 1.5 percent growth rate this year to just over $19 billion; and No. 5 market the U.K. is expected to grow by 4.2 percent to $14 billion.

Besides Asia, another hot region is Central and Eastern Europe, expected to see a growth rate of 10.7 percent. Stacey Lynn Koerner, evp and director of global research integration for Initiative, points to the popularity in the region of private-capital-driven television stations and the wide appeal of new programming alternatives among populations that formerly had few broadcasting options.

Koerner notes that the boom in China can be largely attributed to the government’s loosening of regulations and widening embrace of a consumer-driven culture. In some countries, she said, the political and regulatory climate has a significant impact on how products are distributed and marketed.

Domestically, television continues to outpace all other forms of media in terms of percentage of ad revenue it receives, but the Initiative study notes a few significant changes in the media landscape.

According to the study, cinema advertising in the U.S. was up 20 percent last year, and Initiative predicts it will increase by another 30 percent this year. Worldwide, cinema adspend was up 7 percent in 2003 and will increase by 12 percent in 2004, according to Initiative.

Koerner sees a growing acceptance of pre-movie advertising in the U.S., making it an increasingly attractive route to reach elusive younger audiences. Unlike television, which recently has seen dramatic declines in young male viewership, the theater provides advertisers with a captive audience, Koerner noted.

“We are on the brink of an entirely new advertising medium and revenue stream,” said Koerner. Running commercials in cinemas is increasingly attractive to advertisers across a wide cross-section of categories. “The perceptions of in-cinema advertising are changing to match those in Europe,” Koerner said, “where audience perceptions are that the ads are more creative, and people look forward to them.”

The Internet is also poised to play a greater role, Koerner said. While penetration rates in many countries are only in the 10-30 percent range—compared with more than 60 percent in all urban markets in the U.S.—they are growing rapidly, she said, noting that with the added bonus of progress in broadband technology, there are more opportunities for advertisers in that space.