Financial Crisis Sends Ad Forecasts Down, But Online Still Looks Healthy (Relatively)
For those looking to how online advertising is likely to weather the global financial meltdown, forecasters still seem relatively hopeful—at least compared to traditional advertising. Still, it helps to keep in mind that both ZenithOptimedia and Barclays Capital (formerly Lehman Brothers) internet analyst Doug Anmuth tend to be optimists. However, given the daily drumbeat of dire economic news, the meaning of optimism is being revised downward as well.
—Zenith: The Publicis Groupe media buyer’s latest forecast expects global internet ad spend to grow 23 percent between 2007 and 2010—down from its June prediction of 26.7 percent during that period. Online’s share of the world ad
market is also expected to rise from 8.6 percent in 2007 to 13.8 percent in 2010—a revision upward from 13.6 percent in our last forecast. In part, that’s due to traditional media’s shrinkage in the face of greater economic pressures leading to a pullback from major marketers. Overall, Zenith is forecasting the world’s total ad spend gains to come in 4.3 percent in 2008, which is a retreat from the 6.6 percent growth predicted in its June forecast. Looking to 2009, the total ad expenditure growth has been downgraded from 6.0 percent to 4.0 percent. In the U.S., the ad market is now slated to grow 1.6 percent this year and less than 1 percent the next; in its last forecast, Zenith called for U.S. ad spend gains of 3.4 percent (2008) and 2.6 percent (2009).
—Barclays: Anmuth is significantly lowering his U.S. online ad forecast for 2008 through 2012 (PDF, not online), projecting ad spend of $24.79 billion (+16.9 percent), way below his previous forecast of $26.17 billion (+23.4%) in May. He expect online advertising to grow at a 14.3 percent three-year compound annual growth rate (CAGR), resulting in the web accounting for 13 percent of total U.S. ad dollars by 2011. Anmuth adds: “Additionally we project growth to accelerate in 2010 based on our assumption (hope) that the economy shows signs of improvement after 2009.” More after the jump
—It’s not pretty out there: A week before his forecast is due out, veteran media industry analyst Jack Myers was fairly bullish coming into 2008, but as the year winds down, there is no positive news on the horizon. Still, for a more rounded picture of the ad industry’s health, and the image improves notably. This year, newspaper ads will account for 16- to 17 percent of total spending, down from 21.4 percent two years ago and more than 25 percent as recently as 2002. Myers: “The cataclysmic double digit drop in newspaper ad revenues drives total ad spending for the 12 traditional media categories to a negative 2.0 percent to 3.0 percent overall.” In general, Myers warns that this recession is like no other, as the media landscape has changed dramatically. “[Media sellers and agencies] cannot assume marketers will follow the pattern of past recessions and increase their budgets in hopes of gaining market share. The media downturn is a long-term reality and all those companies that depend on advertising for their living will need to be as diligent today in analyzing their future as those in leadership positions at financial services firms.” He also expects over the next three years, it is certain “that names in our business as legendary as Lehman Brothers was in the financial industry will be declaring bankruptcy and closing their doors.”
—A bad situation made worse: That’s the consensus of a number of ad agency execs surveyed by WSJ, in its report on the Zenith forecast. With the industry already reeling from the year-long ad downturn, some feel the recent downward revisions are a bit too hopeful. Nick Brien, CEO of IPG’s Mediabrands: “I don’t see any growth for the industry next year. It will be scary. There are no Olympics, no election spending and the real impact of what happened on Wall Street will filter down.”
—Recent revisions: As it stands, here’s how some of the leading forecasters viewed online ad spending over the past few months:
—JP Morgan internet analyst Imran Khan lowered his 2008 US display market estimate to $8.2 billion from $8.6 billion— or 14 percent year-over-year growth, versus its previous call for 20 percent growth. Looking to ‘09, the analyst is dropping its projected display forecast to $9.4 billion from $10.0 billion (representing 16 percent growth compared to his prior estimate of 17 percent gains.)
—In August, eMarketer said that U.S. marketers will spend $24.9 billion online this year, a slightly lower estimate than the one it forecast in March. At the time, eMarketer expected online ad spend would reach $25.9 billion in 2008. The revised estimate still represents an increase of 17.4 percent over 2007.
—Financial analyst Cowen reappraised its outlook for U.S. online ad market growth in July to 16 percent year-over-year from its previous projection of 19 percent.
—Magna’s Bob Coen downgraded his forecast for online ad spending in July, calling for 12 percent growth for online advertising this year— a change from his December projection, when he predicted a 16.5 percent rise over 2007.
@davidaKaplan
Oct 7, 2008 7:10 AM ET
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