Advertising boom in developing ad markets compensates for credit-crunch gloom in the West.

In its first advertising expenditure forecasts of 2008, ZenithOptimedia downgrades its combined growth forecasts for North America and Western Europe this year from 4.4% to 3.8%, as the credit crunch drains consumer and business confidence. However, growth continues to strengthen elsewhere – we have increased our 2008 forecasts for the rest of the world from 10.9% to 11.1%.

• Developing market dynamism will maintain global ad growth above ten-year average despite sluggish growth in the developed world.

• Developing markets to contribute 63% of ad expenditure growth between 2007 and 2010, and increase their share of the global ad market from 27% to 33%.

• Asia Pacific to overtake Western Europe in 2010.

• Internet to account for 9.7% of world ad expenditure this year and 12.3% in 2010

The combined result is a slight downgrade of global growth from 6.7% to 6.5%, still well above the 5.0% average rate at which the global ad market has grown for the last ten years. We predict continued above-trend growth in 2009 and 2010, again thanks to dynamism in Asia Pacific, Central & Eastern Europe, Latin America and the Middle East.

The table above demonstrates the contribution of developing markets to the growth in global ad expenditure. China and Russia follow closely behind the US as contributors to growth over the next three years, even though China’s ad market is just 8% of the size of the US ad market, and Russia’s is 5%. Brazil’s contribution is very nearly the same as the UK’s, while its ad market is less than half the size.

Between 2007 and 2010 China will rise in the rankings of the largest advertising markets from fifth to fourth; Russia will rise from eleventh to sixth; Brazil will rise from ninth to seventh; and India will rise from fourteenth to thirteenth.

We noted in our last forecast that in 2007 developing markets for the first time became the main drivers of global adspend growth. Our new forecasts emphasise this point. We now predict that developed markets (which we define as North America, Western Europe and Japan) will contribute 37% of new ad expenditure between 2007 and 2010, while developing markets (everywhere else) will contribute 63%. Over that period the proportion of global ad expenditure going to developing markets will rise from 27% to 33%, two percentage points more than we
forecast back in December.

Central & Eastern Europe, Latin America and Middle East/Africa/Rest of World are all growing at double digit annual rates. Asia Pacific is growing rather less rapidly, because it includes Japan, which is barely growing at all. Excluding Japan, the region grew 13% in 2007, and we expect it to grow by 9%-13% a year to 2010. We predict that Asia Pacific (including Japan) will overtake Western Europe to become the second-largest advertising region in 2010.

Once again we have substantially increased our forecasts for internet advertising as it has continued to exceed our expectations. By 2010 we now forecast internet ad expenditure to reach US$67 billion (up from US$61 billion in our last forecast), and account for 12.3% of the ad
market (up from 11.5%). Online video and local search are now generating substantial new revenues; in the slightly longer term we expect behavioural targeting on social networking sites to provide fruitful new opportunities to advertisers.

Some of the internet’s growth is coming at the expense of newspapers, which we expect to grow only 4% over our forecast period. After adjusting for inflation, this equates to a 5% decline in expenditure. We count advertising on newspapers’ websites as internet advertising, and this is
helping newspaper publishers claw back some of their lost revenue.

Cinema and outdoor are the only media apart from the internet to be gaining market share.

Cinema is growing rapidly in the US, where it is still quite new, and is benefiting from the spread of digital distribution technology, which is reducing production costs and allows advertisers to run time-sensitive campaigns and target local areas more easily. Digital technology is likewise
enhancing the value of outdoor to advertisers, as is contractors’ investment in research and improvement of non-digital displays.

To view additional charts CLICK above on ‘More Images’.