Behind the 2014 global ad forecast
GroupM slashed its outlook to 4.6 percent growth
February 6, 2014
The global media economy continues to rebound slowly from the recession. The agency GroupM slashed its most recent worldwide ad spending forecast from 5.1 percent growth this year to 4.6 percent, citing a number of concerns. And they’re not just in the U.S., where some advertisers continue to hold back on spending, or the Eurozone, where debt and unemployment dog many countries. Even spending in Brazil, Turkey, China and Russia is not as hot as it has been the past few years, an inevitable development considering how strongly they’ve been performing. Still, there’s a high interest in digital spending, specifically mobile, in countries across the world, and that will help drive the small but steady growth we’ve become accustomed to in recent years. Adam Smith, futures director at GroupM, talks to Media Life about the Eurozone struggles, the outlook for financial advertisers, and how print is doing in countries outside the U.S.
How would you describe the state of the media economy as 2014 begins?
Advertisers are cautious but as ambitious as ever to diversify investment into digital/mobile.
In Europe consumer spending power is still constrained by debt, stagnant wage growth and slow job creation.
Brazil, Turkey, Russia, the ASEAN group, the Gulf States – all are running a little cooler for a variety of reasons including commodities, competitiveness and capital.
China is still the biggest single stimulus to global ad investment, but the apples are harder to reach.
How does it compare to last year at this time?
Similar. The Eurozone is still unsafe, having let another year pass without reform.
Advertising in my home market of the UK picked up suddenly in 2013. Our labor was cheap enough to hoard in the recession and for now remains cheap enough to hire in recovery. Our collective spending power is growing, but not yet that of the individual household. I attribute the UK recovery to corporate confidence that finally investment is worth resuming. We’ve made token attempts to reduce the size of government, but really we are all still pretty Keynesian.
On investment, we’ve got a lot of catching up to do, as all that labor hoarding has punched a hole in productivity. I wonder if the USA will see something similar in 2014. Usually the USA leads the UK, not the other way round.
Other year-on-year remarks would include Japan putting some meat into stimulus and a general raising of awareness around the Fed taper and monetary consequences in some younger economies: essentially, if the U.S. tightens, they have to do the same. The return of big inflation unseen since the 1990s in Argentina and Venezuela reminds us what happens when governments lack reality and resolve.
What economic factors will you be keeping an eye on moving forward?
Deflation in the Eurozone. China’s consumer economy: wages, credit, demand. And U.S. employment.
Which ad categories do you foresee being strong in 2014 (aside from political)?
I never forecast whole categories, but note that financial’s share slipped a bit in 2012. Auto seems to have a busy a new-product pipeline. E-commerce is growing fast, and seems to stimulate a lot of advertising, especially in digital.
Which ad categories are still recovering from the recession and are lagging?
There are no outliers. Finance seems the most likely to be lagging, for obvious reasons, but the data at this level are not what I would call significant.
What do you predict for print (newspaper and magazine) advertising this year? Why?
In the UK we now call ink-on-paper “press” and reserve “print” for the whole multimedia brand.
We are pretty certain ink-on-paper advertising will shrink again in 2014, reciprocating with still-strong growth in digital. Press can still pack a punch with rapid reach and in response ROI, but every year its pricing has to flex as the newsstand habit fades. I expect the totality of print advertising will find a floor and start to rebuild within five years as digital substitution becomes normal to consumers.
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