Behind the
brighter outlook for media
By Diego Vasquez
Jul 21, 2010
For the second time in less than a week, a major forecaster has upped his outlook for U.S. advertising in 2010, despite the country's continued high unemployment numbers, a recent slow in the recovering real estate market, and fears that Europe's credit woes could cross the ocean. Jonathan Barnard, head of publications at ZenithOptimedia, sees U.S. spending rising 1.1 percent this year, though he cautions that the recovery will be long and draw out well beyond 2010. Barnard is also more optimistic about the global forecast, upping his estimate to 3.5 percent growth this year, from 2.2 percent a few months ago. Late last week, Magna forecaster Brian Wieser also upgraded his forecast, citing many of the same factors as Barnard. Barnard talks to Media Life about what categories will lag the recovery, which ones will set the pace, and why Canada looks like it will rebound much quicker than the U.S.
What prompted you to upgrade the global forecast?
Advertisers were more willing to spend in the first half of the year than we expected, particularly in the U.S. and Western Europe, indicating some confidence in continued recovery.
What are you seeing the U.S. that has made you more optimistic?
TV had a very strong start to the year, with the record-breaking Super Bowl audience and Vancouver Olympics, followed by upfront rate increases of 5-6 percent. Network radio was up about 20 percent in first quarter and second quarter.
While most other media have not performed so well, those that continue to decline (newspapers, magazines, spot radio) are doing so less rapidly.
Which categories of media are looking strongest in the U.S. right now and will help boost the recovery the most?
The internet continues to grow at a very healthy pace, much faster even than fast-growing traditional media like TV and network radio. We forecast internet advertising to grow 14 percent this year, and add $2.8 billion to the total ad market (which will increase by only U.S.$ 1.7 billion, taking into account the negative contribution from newspapers, magazines and spot radio).
Which categories will recover more slowly and why?
As mentioned, newspapers, magazines and spot radio will continue to shrink this year, by 10 percent, 2 percent and 6 percent, respectively.
Newspapers and magazines have lost readers after instituting cost-cutting measures in 2009, such as reducing home delivery and shrinking their distribution network, and continue to suffer from the migration of audiences and advertisers to the internet.
Are there any ad categories that are looking significantly better or worse than when the year began?
We have upgraded our forecasts for magazines from minus-7.2 percent to minus-2.1 percent, and for television from minus-0.5 percent to plus-6.0 percent.
How much will political spending this year help in the U.S.?
We're not expecting nearly as much activity as there was for the 2008 election, but political spend should add a few hundred million to the total.
You note that after a recession, spending tends to come back strong a few years later, but you're not seeing quite the surge in 2012 as in similar years in the past. Why is that?
The sheer depth of the latest recession has damaged advertisers' confidence in their long-term prospects.
Which developing markets are growing most quickly over the next few years and why?
The fastest-growing markets are generally Eastern European markets that suffered large shocks in the beginning of 2009 but still have plenty of long-term growth potential and are making up some of their lost ground. We forecast Ukraine to grow by 83 percent between 2009 and 2012, Russia to grow 68 percent, and Belarus to grow 60 percent.
Which developed markets will see the strongest growth over the next few years and why?
Canada managed to weather the downturn better than most developed markets and is recovering well, thanks to consumer spending driven by low interest rates and strong job creation.
We forecast 14 percent growth in Canadian ad spend between 2009 and 2012.
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