According to the latest figures ZenithOptimedia, global ad spending will decline by 6.9% in 2009 compared to last year. The largest losses will be in emerging Central and Eastern European markets, which will drop by 13.9%. North America is projected to decline by 8.3%, with the United States losing 8.7%—more than both regional and global averages. Western Europe’s projected ad-spend decline is 6.7%.
The chief factor causing the decline is, of course, the global financial crisis: consumers are putting off big purchases, shifting consumption from premium to value products and spending more time at home. Zenith points out that another factor affecting the ad market is that 2009 is a comparatively slow year, with no quadrennial events such as the Olympics or elections, which make comparisons to 2008 even less favorable.
Finance, automotive and travel markets are among those that have sharply cut back spending.
Consumer confidence in credit markets is at an all-time low. Savings accounts and certain types of insurance remain the only financial products with growth potential and some ad dollars.
Automakers, says Zenith, are suffering from long-term problems that the downturn has exposed and exacerbated but not caused. Interestingly, some European markets (France, Germany) have seen auto-advertising growth due to government incentives.
As businesses cut back expenses, airlines have lost premium traffic. However, leisure travel is still popular—and so is airline advertising to consumers in markets with exchange rates favorable to consumers spending euros or dollars.
Latin America and Asia Pacific are the least affected markets, projected to lose only a respective 2% and 3.4% of ad revenue since 2008. Most Latin American markets will continue growing, except Brazil and Colombia. Ad expenditure will also grow in China, India and Indonesia, counterbalanced by sharp falls in Taiwan, Singapore, South Korea and Japan, which contributes 38% of the region’s ad expenditure.
The large drops of ad revenue in Central and Eastern European markets—including Russia, Turkey and Ukraine—are, according to Zenith, one-time corrections by international advertisers who have reassessed the long-term potential of these markets.
Since ad expenditure correlates strongly with corporate profits, Zenith predicts that the ad market will not recover until profits start to pick up again. North America, including the U.S., will not see ad-spend growth until 2011, when Zenith projects revenues will finally rise by 1%. All other regions, led by Africa, the Middle East, and Central and Eastern Europe, will begin to rebound in 2010.
The Internet is the only medium expected to grow this year. Most of such growth will come from search advertising, as search continues to drive Internet growth with consumers looking for bargains. Zenith predicts 9% growth of U.S. search advertising, compared to a 1.8% decline in display ads. Online video, rich media and radio are forecast to grow by nearly 30%; however, these represent less than 12% of the total U.S. Internet expenditure.
Offline, television will remain strong. Though ad revenues will fall 5.5%, TV advertising will still gain market share: advertisers are cutting budgets across he board but often cut TV last. According to Zenith, this is because they know it best and are convinced of its effectiveness.