JPMorgan analyst Alexia Quadrani is now predicting global ad spending to decline by nearly 6 percent this year, fueled by an anticipated 9 percent decline in the U.S.
The U.S. decline will be driven by an expected 20 percent falloff in local ad spending, though Quadrani also expects national ad expenditures to fall by 6 percent. The analyst attributes both anticipated declines to revenue erosion at major advertisers.
Local markets are being hurt by their dependence on “beleaguered” industries such as automotive and retail, small businesses being “eaten up” by larger national chains like Walmart and the “less resilient nature of local businesses to spend in a downturn, which leads to bigger cuts early in a down cycle and a lag in a recovery,” Quadrani wrote in a recent report that highlights macro trends in the ad industry. (Download report here.)
“National ad spending is falling as well, largely reflecting declining revenues among major advertisers,” Quadrani added. “While large advertisers tend to lag on the way into a downturn as they will fight the tide and keep spending as long as they can preserve market share and stimulate growth, at a certain point ad budgets contract in an effort to preserve profitability.”
Quadrani’s forecast comes as media agencies such as Publicis Groupe’s Zenith Optimedia, Interpublic Group’s Magna and WPP Group’s GroupM lower their estimates for ad spending this year, amid a drumbeat of bad news related to the recession.
Like other forecasters, Quadrani expects emerging markets such as China and India to continue to grow this year, albeit at a slower clip. In China, for example, the report predicts spending growth of 7 percent, down from 13 percent in 2008.
The picture for Europe, however, is nearly as bleak as in the U.S., with Quadrani projecting declines of 7 percent for the U.K, 6.5 percent for Germany, 8.6 percent for France, 6.5 percent for Italy and 9 percent for Spain.
Quadrani anticipates a “tempered recovery” in late 2009 or early 2010, although the “depth and length of this downturn will have had a negative impact on (ad buy) pricing, which will take time to recover.”
Long term, however, JPMorgan researchers don’t “expect the ad market to once again regain its historical premium growth rate to the overall economy and at best foresee advertising growth matching nominal [Gross Domestic Product] growth several years into the expansion cycle,” Quadrani wrote.
Source: Adweek
Author
Get our newsletter and digital focus reports
Stay current on learning and development trends, best practices, research, new products and technologies, case studies and much more.
