ZenithOptimedia, GroupM soften global ad spend predictions

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Media services companies ZenithOptimedia and WPP's GroupM have softened their independent global ad spending predictions for 2012 in forecasts released Dec. 5.

GroupM expects a 6.4% increase in global ad spending in 2012, which is less than the 6.8% prediction the company had reported in July. ZenithOptimedia is more conservative in its estimates and predicts that global advertisers will increase spending 4.7% to $486 billion in 2012, which is down from its October forecast when the company predicted 5.3% growth for 2012.

Jonathan Barnard, head of forecasting at ZenithOptimedia, said the predictions were downgraded because of weak economic activity in Western Europe. “Since October we've seen the euro zone market failure, which has darkened our prediction a lot in Western Europe and the euro zone,” he said. “But I was surprised that globally, the prediction is quite positive.”

While ZenithOptimedia has predicted a slower global ad spend than it had anticipated two months ago, it is still expected to grow 3.5% from 2011. “There is rapid growth in developing markets and advertisers cut back heavily in 2009, so there is no need for large cost cutting again,” he said.

In addition, North America is looking better than it did back in October, said Barnard. With healthy retail sales around the holidays and employment growth, ZenithOptimedia expects a 3.6% growth in North American ad expenditure in 2012, a bump from its 3.5% prediction in October. Developing markets are also helping drive growth. ZenithOptimedia expects this sector to increase its share of the global ad market from 32.3% to 35.9% over the next three years.

Barnard said that another reason that global spend is expected to increase next year is that advertisers have more cash on hand these days. “Interest rates are so low that it is not a good time to invest cash in the bank. But marketing is a great way of generating growth in a downturn,” said Barnard. “It's a time when consumers have less money and will consider switching their loyalties in order to save money.”

According to ZenithOptimedia, much of the global ad growth will be driven by Internet marketing. The company predicts that Internet advertising will account for 52.9% of the growth in total expenditure between 2011 and 2014.

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