Media firm MagnaGlobal lowered its ad revenue forecast for 2012 because of continued weakness in the U.S. economy, and warned that traditional direct marketing, notably direct mail, will continue to be challenged by postal issues and the growth of digital media.
In a report released on Oct. 14, the firm said it expects media companies to achieve 2.9% total ad revenue growth in 2012 compared with 2011. Meanwhile, projected ad revenue gains in 2011 remain unchanged at 1.6% compared with 2010, at $173.5 billion. The forecast takes into account TV, Internet, print, radio, outdoor and direct marketing channels, including direct mail.
MagnaGlobal blamed next year’s downward adjustment on declines in spending on consumer goods and services, manufacturing, and continued troubles in the labor and housing markets.
The firm projects total direct marketing ad revenue to rise by 3.9% to $44.13 billion this year compared with 2010, and to gain another 1.8% next year. Direct mail ad revenue is projected to grow 0.9% this year to $20.78 billion while falling 1.4% next year. Online direct is projected to grow 19.8% this year to $17.96 billion and another 11.8% next year.
In its report, MagnaGlobal singled out direct mail as especially vulnerable in light of postal issues, including the possible end of Saturday mail delivery. Advertisers could end up shifting print dollars into digital, according to the firm.
The growing disparity between traditional and digital direct channels is attributable to “the segmentation of options available to smaller advertisers; they’re more likely to go and use search, to use social media, and perhaps more daily deals, and mobile is emerging as a platform many advertisers are now leveraging to drive traffic,” Alex Feldman, manager of global forecasting at MagnaGlobal, told Direct Marketing News. “The bottom line is, local advertisers want to be closer to the point-of-sale, and online media allows them to do just that.”
Feldman pointed out that, according to MagnaGlobal’s projections, 2013 will be the first year in which online direct yields greater ad revenue than direct mail.
MagnaGlobal’s downward adjustment follows ZenithOptimedia on Oct. 5 revising down its projected 2011 global ad spending forecast by half a percentage point to 3.6% growth, amounting to $466 billion, due to a slow economic recovery in developing markets and continued fears of a double-dip recession.