State of play: Zenith Optimedia's take on where local ad dollars are heading

  • Media
  • June 22, 2012
  • StopPress Team
State of play: Zenith Optimedia's take on where local ad dollars are heading

ZenithOptimedia has once again gazed into its crystal ball and released its global adspend forecasts, including predictions for the New Zealand media marketplace. And both the global and local trends make for interesting reading.

ZO has predicted the total spend in New Zealand will stay fairly flat at just over $2 billion. And according to the figures, newspaper spending will drop to $500 million by 2014, down from $830 million in 2005, while magazines are heading for $180 million by 2014, down from $260 million in 2005.

That cash will largely be funnelled into online, with predictions of $500 million being spent there by 2014, a massive jump from $44 million in 2005 and $300 million in 2011.

TV is set to keep climbing back up close to 2005 levels with $654 million by 2014, and cinema and outdoor are expected to remain fairly flat.

       

Globally, ZO is forecasting a 4.3 percent growth rate in 2012, slightly down from the 4.8 percent forecast made in March. That equates to a total of US$502 billion by the end of the year. And it's forecasting 5.3 percent and 6.1 percent growth for 2013 and 2014 respectively.

The ad market slowed in April and May as advertisers became more cautious about the state of the global economy. The Greek elections have revived fears of a Eurozone break-up, causing investors to withdraw from risky assets. Partly as a result, economic growth has slowed across the developed world, and recessions have deepened in the southern Eurozone. Several developing markets have slowed as exports to the developed world have tailed off, although their growth generally remains much firmer than in developed markets.

The first of the year’s big sporting events—the Euro 2012 Football Championship—has begun in Poland and Ukraine, to be followed by the Olympics in the UK in late July and August. These events, together with the US elections, provide a regular boost to global adspend every four years, known as the ‘quadrennial effect’. This year we expect these events to add US$6.3 billion to the global ad market, almost all of it concentrated in the five months from early June to early November. We therefore expect adspend growth to pick up from June onwards.

The Eurozone appears to have avoided a recession under the technical definition (two consecutive quarters of GDP decline) by maintaining flat output in 2012, but its economy is clearly in serious trouble, with deep recessions and painful unemployment in markets like Italy, Spain, Portugal, and of course Greece. These are the four markets where adspend is shrinking rapidly, as local advertisers struggle to maintain their cash reserves, and international advertisers reconsider the long-term potential of their investments. Elsewhere in the Eurozone adspend is flat, except in Austria, Finland and Germany, where it is growing at about the rate of inflation. Overall we forecast ad expenditure to decline 1.1% in the Eurozone in 2012.

Adspend growth in the Eurozone (key markets, 2012)

New Zealand
NZ$ million
Total
20052,139
20062,125
20072,234
20082,207
20091,934
20102,029
20112,125
20122,103
20132,110
20142,137
NewspapersMagazinesTelevision
2005830260666
2006810251641
2007826257654
2008760249647
2009623217570
2010627219607
2011627219618
2012564200630
2013525190642
2014500180654
RadioCinemaOutdoorInternet
2005256117244
2006269107965
20072741078135
2008268974200
2009236668214
2010241870257
2011246877330
2012236865400
2013230865450
2014230865500
Television
TotalFreePay
2005666
2006641
2007654
2008647
2009570
2010607
201161855662
201263056565
201364257270
201465457975
Online
DisplayClassifiedSearch
2005
2006
2007425934
2008587560
2009647178
2010808493
20119994135
2012130100170
2013145105200
2014175115210

Adspend growth (%)

Austria

+3.9

Belgium

+0.1

Finland

+3.2

France

+0.9

Germany

+2.1

Greece

-19.5

Ireland

+0.1

Italy

-5.0

Netherlands

+0.1

Portugal

-10.4

Spain

-12.0

We have also downgraded Asia Pacific slightly from 7.4% growth this year to 6.7%, and Latin America from 9.2% to 7.8%. The advertising recovery remains robust in North America, however, which we have held steady at 3.6%, also holding the Middle East and North Africa at 1.0% while the political and social unrest continues.

In the longer term, we expect gradual but sustained improvement in ad expenditure in North America, Western Europe and the Middle East & North Africa in 2013 and 2014. Meanwhile Asia Pacific, Central & Eastern Europe and Latin America should all achieve 7% to 10% annual growth over these two years.

Advertising expenditure by region

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

US$ million, current prices. Currency conversion at 2011 average rates.

20102011201220132014
North America162,165165,202171,203177,930186,513
Western Europe106,078108,232108,694111,571115,042
Asia/Pacific124,760132,144141,016150,498162,440
Central & Eastern Europe23,98025,90627,51029,98732,944
Latin America32,06535,36438,11741,93645,731
Middle East & North Africa4,8814,1554,1984,3134,412
Rest of world9,81210,44311,21812,26513,496
World463,741481,446501,956528,500560,578

Between 2011 and 2014 we predict 60% of all the world’s growth in ad expenditure will come from developing markets (which we define here as everywhere outside North America, Western Europe and Japan). 50% will come from just ten developing markets. The four BRIC markets alone (Brazil, Russia, India and China) are forecast to account for 35% of global growth. Beyond the BRICs, there are six fast-growing markets we forecast to add between US$1 billion and US$4 billion each to the global ad market, and deliver another 15% of global growth: Indonesia, Argentina, South Africa, South Korea, Thailand and Turkey.

Beyond the BRICs: the next wave of emerging ad markets

Adspend growth (2014 v 2011)

US$ million, current prices. Currency conversion at 2011 average rates.

Adspend growth

1China

16,456

2Brazil

5,397

3Russia

4,305

4Indonesia

3,959

5Argentina

2,268

6South Africa

2,067

7South Korea

1,702

8India

1,540

9Thailand

1,034

10Turkey

1,030

Source: ZenithOptimedia

In 2014 we predict Brazil will overtake the UK to become the fifth-largest ad market, and Russia will overtake South Korea to become the tenth-largest. After that, the next developing market to enter the top ten will probably be Indonesia, where we expect adspend to increase from US$5.3 billion in 2011 to US$9.3 billion in 2014. Indonesia’s ad market is currently slightly smaller than India’s, which was worth US$5.8 billion in 2011, but is growing substantially faster. We expect Indian ad expenditure to reach US$7.3 billion in 2014.

Top ten ad markets

US$ million, current prices. Currency conversion at 2011 average rates.

2011

Adspend

2014

Adspend

1USA

154,129

1USA

173,593

2Japan

49,949

2Japan

53,434

3China

32,299

3China

48,755

4Germany

25,571

4Germany

27,548

5UK

19,202

5Brazil

22,216

6Brazil

16,819

6UK

21,595

7France

13,581

7France

14,510

8Australia

12,761

8Australia

13,660

9Canada

11,072

9Canada

12,920

10South Korea

10,232

10Russia

12,860

Global advertising expenditure by medium

The internet is by far the fastest growing medium – we forecast it to grow on average by 16% a year between 2011 and 2014. Display is the fastest-growing sub-category, with 20% annual growth, thanks to the rapid rise of social media and online video advertising. Display advertising is now growing substantially faster than paid search (which we forecast will grow by 15% a year to 2014) and classified (8% a year). Display advertising accounted for 36% of internet advertising in 2011; by 2014 we expect this proportion to increase to 40%.

Internet advertising by type

US$ million, current pricesCurrency conversion at 2011 average rates.

2010

2011

2012

2013

2014

Display

22,497

27,343

32,865

39,439

47,748

Classified

11,408

11,129

12,011

12,872

13,866

Paid search

33,766

37,975

43,782

50,480

57,773

Total

67,670

76,447

88,658

102,791

119,387

We estimate that social media advertising accounted for 14.4% of internet display in 2011. This includes only the paid-for ads appearing within social media sites like Facebook, Twitter and LinkedIn; it does not include any non-paid activity by advertisers on these sites, such as brand pages and promotions. Social media sites are now at or near the top of the list of most popular sites in developed markets, and are growing rapidly in popularity in the developing world. A third of all internet visits in the US now go to Facebook alone. Average costs are currently lower in social media than for other types of display, partly because advertisers are still learning how to engage consumers on these sites rather than intrude upon their conversations. But better targeting and new forms of advertising (such as Sponsored Stories on Facebook) helped prices rise throughout 2011, a trend we expect to continue. We forecast social media to grow at an average rate of 31% over the next three years, achieving an 18.5% share in 2014.

The growth of social media advertising

US$ million, current pricesCurrency conversion at 2011 average rates.

2011

2012

2013

2014

Social media

3,937

5,291

6,941

8,833

Share of display (%)

14.4

16.1

17.6

18.5

Source: ZenithOptimedia

Overall, we predict internet advertising will increase its share of the ad market from 16.0% in 2011 to 21.5% in 2014. Internet advertising already accounts for more than 25% of ad expenditure in six markets (Canada, Denmark, Norway, South Korea, Sweden and the UK), and by 2014 we expect it to account for more than 30% in six markets (Australia, Canada, Norway, South Korea, Sweden and the UK). In the most advanced market – the UK – internet advertising attracted 33% of expenditure in 2011, and we forecast it to attract 39% in 2014. There is clearly potential for the internet’s global market share to continue to grow for many years to come.

The internet is also the biggest contributor of new ad dollars to the global market. Between 2011 and 2014 we expect internet advertising to account for 55% of the growth in total expenditure. The next biggest is television, which we forecast to contribute 42% of growth. Television’s share of the global ad market has risen steadily over the last few years: it reached 40.2% in 2011, up from 36.9% in 2005. The amount of time viewers spend watching television has increased, and even though viewers are presented with a wider choice of channels than ever, the biggest television events are attracting record audiences. We expect the popular televised quadrennial events to lift television’s share to 40.4% in 2012.

The internet has risen principally at the expense of print. Between 2001 and 2011 the internet’s share of global advertising rose by 14 percentage points, while newspapers’ share fell 12 points and magazines’ share fell by 5 points. Magazines have suffered less than newspapers, because the experience of reading a magazine is less easy to replicate online, and because they do not rely so much on the timely delivery of information, where the internet has a big advantage over newspapers. We forecast newspaper advertising to continue to shrink, by an average 1.2% a year over the rest of our forecast period, but we expect magazine advertising to stabilise in 2014. Note that these figures include only advertising in printed editions of these publications, not on their websites, or in tablet editions or mobile apps, all of which are picked up in our internet category. The prospects for newspaper and magazine publishers are therefore not quite as bleak as our headline figures would make them appear.

Advertising expenditure by medium

US$ million, current pricesCurrency conversion at 2011 average rates.

2010

2011

2012

2013

2014

Newspapers

98,079

96,134

94,212

93,222

92,761

Magazines

45,058

44,715

43,926

43,696

43,882

Television

182,601

191,771

200,795

211,555

224,194

Radio

32,791

33,789

34,561

35,660

36,755

Cinema

2,361

2,468

2,635

2,838

3,042

Outdoor

30,989

31,714

32,487

33,695

35,136

Internet

67,670

76,447

88,658

102,791

119,387

Total *

459,550

477,038

497,274

523,456

555,156

* The totals here are lower than the totals in the ‘Advertising expenditure by region’ table above, since that table includes total adspend figures for a few countries for which spend is not itemised by medium.

Share of total adspend by medium (%)

2010

2011

2012

2013

2014

Newspapers

21.3

20.2

18.9

17.8

16.7

Magazines

9.8

9.4

8.8

8.3

7.9

Television

39.7

40.2

40.4

40.4

40.4

Radio

7.1

7.1

7.0

6.8

6.6

Cinema

0.5

0.5

0.5

0.5

0.5

Outdoor

6.7

6.6

6.5

6.4

6.3

Internet

14.7

16.0

17.8

19.6

21.5

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