MediaFile

Same old song: Ad spending forecast cut yet again

April 14, 2009

So how low can it go? One percent? Three percent? Five percent? Let’s try a decline of 6.9 percent — since that’s the latest forecast for global advertising spending from ZenithOptimedia.

To the surprise of few, the agency, part of French advertising group Publicis, revised downward its outlook for 2009, predicting that only Internet ad spending now looks like it will rise for the year.

“Since we released our last forecasts in December the global ad market has taken a substantial turn for the worse,” said ZenithOptimedia. (Back then, the agency was calling for a flat market).

The trouble is that nobody seems to have accurately pegged the severity of the advertising downturn. Everybody’s forecast has been lowered — often more than once — in trying to keep up with the swan dive in spending. And now experts can’t seem to agree on whether ad spending with be a leading or lagging indicator, or whether the worst has passed or is still to come.

Experts can hardly be blamed for getting it wrong. After all, as ZenithOptimedia puts it, the business has seen “unprecedented economic problems.”

But the size of the revisions should send chills up the spine of media-watchers, who are desperate for some clarity. Here’s what ZenithOptimedia offered up on Tuesday:

We are currently in the middle of a period of steep deterioration in ad expenditure. The downturn began in Q3 2008, accelerated in Q4, and Q1 2009 was at least as tough as the preceding quarter. As we enter Q2, there is limited long-term visibility in the market as most advertisers wait until the last moment to confirm their spending commitments. Many are treating advertising as a discretionary expense, and one they find convenient to cut. Ad expenditure correlates strongly with corporate profits, and the ad market is unlikely to start its recovery until profits start to pick up again.

The current barriers to recovery include lack of trust in the credit markets, and low confidence in prospects for short-term growth. If governments manage to tackle the bad debt poisoning the credit markets, and if their stimulus programmes kick-start economic growth, then advertisers should start to regain their confidence. This will take time, and occur at different speeds in different markets. At this point we forecast 1.5% growth in global ad expenditure in 2010 followed by 4.5% growth in 2011, but these forecasts will be revised in the light of new information

Keep an eye on:

  • PepsiCo, taking umbrage over a nationwide advertising campaign accusing its Gatorade energy drink of missing crucial electrolytes, sued Coca-Cola Co for false advertising and taking scientific liberties (Reuters)
  • NBC’s Boston affiliate has reversed course and decided to carry the network’s new Jay Leno primetime talk show after all (The Hollywood Reporter)

  • Amazon, in response to angry online commentary, said that “an embarrassing and ham-fisted cataloging error” had caused thousands of books on its site to lose their sales rankings and become harder to find in searches (The New York Times)

(Photo: Reuters)

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