Media economy
Touching bottom in the ad downturn
By Diego Vasquez
Jul 9, 2009 - 3:10:28 AM

It’s still not clear when the U.S. media economy will start to turn around, with forecasters saying that second quarter may be as bad as first. But worldwide, a recovery seems to be just around the corner, according to a forecast issued earlier this week by London-based media agency ZenithOptimedia. The forecast says that we’ve likely reached a bottoming-out point for global media spending and that worldwide advertising will be up 1.6 percent next year, after a decline of 8.5 percent this year. Stronger numbers from small but growing markets, such as India, will help give the overall global ad economy a boost. Though North America and Western Europe won’t see a recovery until 2011, 62 of the 79 markets tracked by ZenithOptimedia will grow next year. That growth will be stoked by increases in packaged goods and retail categories, as well as the continued strength of internet advertising and comparatively steady numbers for TV, cinema and outdoor advertising. Jonathan Barnard, head of publications at ZenithOptimedia, talks to Media Life about why things look better outside the U.S., why North America will lag behind, and what will drive the recovery.

 
You say that there are signs emerging that the downturn is approaching its lowest point. What are those signs?
 
Advertisers are becoming more willing to commit budgets in advance instead of waiting until the last moment to confirm bookings.

Media prices are no longer falling so quickly.
 

When will the recovery begin and what will drive it?
 
We expect the downturn to bottom out in third quarter this year and stabilize in fourth quarter, but forecast no actual recovery until 2010. The recovery will begin when advertisers stop worrying about their short-term survival and begin trying to expand their market share.

They will be looking for clear indications that the wider economy has stopped shrinking and that the credit crisis has come to an end.

 
What are the ad categories that will drive the global recovery? (Ex.: telecom, auto, etc.)
 
When we see the auto and finance categories increase their ad expenditure, then we'll know that the downturn is well and truly over. But we expect the first growth to come from value brands in the packaged goods and retail categories.
 

Why has internet advertising been impervious to the recession? What areas (geographically) are seeing the biggest online ad booms and why?
 
Internet advertising has not been impervious to the recession -- its growth rate has more than halved this year.

However, it continues to grow while other media do not because it offers clear, instant proof that it can increase advertisers' sales and generate a return to investment.

This is true across the world, and internet advertising is growing equally quickly just about everywhere.
 

You see a rather bleak future for newspapers. Will this category ever recover to 2007 levels, and why or why not?
 
Newspapers may well return to 2007 levels globally, since newspapers are still growing and attracting new readers in developing markets.
 
In North America and Western Europe, however, their ad revenues may well have peaked, at least in real terms.

They have lost classified advertising to the internet, and more and more people turn to television or the internet for their news and commentary.
 

While you forecast the global economy will begin to turn around next year, North America will still be down. Why is it lagging? When will its recovery begin and what will drive it?
 
The U.S. is at the center of the crisis in trust of the financial system, and has suffered the most damage to this system.

It will take U.S. consumers and companies longer to recover their trust of banks and their confidence to invest in their future.
 

There are some markets that have been less affected by the recession. What geographic areas have held up during the downturn and why?
 
Some large markets in Asia Pacific continue to grow healthily, notably China and India. Their growth is substantially lower than it has been in recent years, but nevertheless looks strong in comparison with developed markets.
 
Latin America also seems to have escaped the worst effects of the downturn. It is the only region we do not expect to shrink this year; we expect it to remain static.
 

You say the "return to growth in 2010 and 2011 will bring no end to the pain of many big media owners." Why? Who will hurt the most?
 
The big media owners are facing ever more intense competition for the scarce resource of consumers' attention and will continue to lose market share even as the ad market recovers.

In many cases -- long-established national broadcasters, traditional publishers, even some web sites -- the growth of the ad market may not be enough to make up for the loss of market share.
 

How will technology drive the growth potential for other media?
 
Digital technology is expanding consumer choice and increasing competition in just about every medium. This is generally good for advertisers, since more competition means lower prices.
 
It also means that advertisers will have a multitude of options available to them to reach their target audiences, and only those media that can demonstrate their value in a rigorous and quantifiable manner will reap the full benefits of the upturn.



© 2010 Media Life