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June 18, 2012

Magna Global Advertising Forecasts 2012

  Europe shaken but rest of the world shows resilience: +4.8% in advertising revenues globally 
MAGNAGLOBAL ADVERTISING FORECASTS 2012
Europe shaken but rest of the world shows resilience:
+4.8% in advertising revenues globally
 
Key Findings

- MAGNAGLOBAL’s 2012 advertising growth forecast is revised to +4.8%. This is 0.2% less than our previous forecast published in December 2011 but still a resilient performance considering the economic environment – a real GDP growth of only +3.5%.

- The global advertising market is expected to reach $480 billion this year. The US remains the largest market with $152 billion. Japan, China, Germany and the UK complete the top five.

- Emerging markets now account for 25% of global advertising revenues, outgrowing Western Europe (23%). They will grow to represent 33% of global ad revenues by 2017.

- Most of Western Europe is suffering another year of advertising slowdown. Notable exceptions include Germany and a resilient UK market boosted by the London Olympics. Overall Western Europe ad market will shrink by 0.2%.

- By contrast Central and Eastern Europe will grow by 6.4%, Latin America by 9.0% and Asia-Pacific by 8.3%. North America will grow by 3.9%, which is a modest performance in a US election year.

- Television will benefit from the “quadrennial” events of 2012. It will grow by 5.2% and remains the number one media globally. Internet advertising will grow by 13.5% to nearly $100 billion. Internet becomes the second biggest media, outgrowing newspapers and reaching a 20.3% global market share.
 
A resilient advertising market

In 2012, media companies around the world will see their advertising revenues grow by +4.8% to total $480 billion (constant USD 2011 basis). This new estimate is slightly lower (-0.2%) than our +5.0% prediction in December 2011, with most of the slowing coming from Western Europe.
 
The global economy is growing at a moderate pace in 2012. Real GDP growth will average +3.5% globally according to an April update from the IMF. This is below IMF’s September 2011 prediction (+3.9%) but slightly up from January’s +3.3% prediction,
 
suggesting stabilization in global outlook. Advanced economies are predicted to grow by +1.4%, up from January’s +1.2% prediction, although there is a widening divergence between slow but steady recovery in the US (+4.0% growth) and weakness in the euro area (-0.3%).
 
Western Europe
 

Amidst economic slowdown, political uncertainty and fiscal austerity, advertising markets will decline in most of Western Europe. As predicted by MAGNAGLOBAL in December, Greece, Spain, Portugal, France and Ireland will see drops in advertising revenues this year and they are joined by Italy. The year-on-year rate of decline offers various shades of grey, with most other markets expected to suffer high-single-digit decline. In Spain, this year’s drop (-8.4%) will be the fourth year of downturn in the last five years; at the end of 2012, the Spanish market will be 37% smaller than its pre-slowdown level in 2007.

In contrast with the south of Europe, UK and Germany are showing resilience. The UK market is expected to grow, in spite of the economic downturn that hit the country in the first quarter. The two big events of 2012 (the Queen's Jubilee and the London Olympics) have proved even stronger than anticipated, boosting marketing activity and advertising spend in the first half of the year. Germany and the UK are expected to grow by respectively 1.7% and 2.4%. However, low growth in the two biggest markets of Western Europe will not be quite enough to offset the decreases in other markets, and MAGNAGLOBAL foresees the region to show a -0.2% decline overall (compared to +1.1% previously expected).

Central and Eastern Europe
 

Nordic countries see positive but decreasing advertising growth while Central and Eastern Europe (CEE) markets are experiencing mixed trends. Four markets are to see decreases (Hungary, Croatia, Slovakia, Romania) while the Czech Republic (+0.4%) and Poland (+3.6%) will slow significantly. Poland would perhaps barely grow without the benefit of hosting the 2012 European Soccer Championship. Meanwhile Turkey (+8.0%), Russia (+8.9%) and Ukraine (the Euro Soccer co-host) (+17.2%) are still growing rapidly. The CEE region will expand by an average 6.4% and Europe as a whole will grow by a modest 0.9% in 2012.
 
North America

As anticipated by MAGNAGLOBAL, North America is in better shape than Europe this year. US media companies will see their advertising revenues increase by 4.0%. Online advertising revenues will grow double-digit once again but newspapers (-6.6%), magazines (-3.8%) and radio (-0.8%) will decrease. Outdoor media will grow moderately (+4.0%) while television will increase by 6.0% reaping the benefits of the biggest political advertising spending year ever. Following a landmark decision by the Supreme Court in 2010, the “Political Action Committees (PACs)” are now allowed to raise and spend unlimited amounts to support presidential or congressional candidates or advocate various causes. They mostly buy airtime in local television and local radio, and are gradually increasing investment in digital and social media. Without the $2.5 billion in incremental political spending this year and the $630 million in incremental Olympic adspend, total US advertising revenues would have grown by a more modest 2.3%.
 

Asia Pacific
 

Our Asia Pacific forecast is largely unchanged, at 8.4% (previously: 8.5%) but that is the result of contrasted trends too. We upgrade our Japan prediction from 1.3% to 2.6%, based on a stronger-than-expected rebound in the first four months and the low comparison base of 2011 (natural disasters of 2Q). Meanwhile we reduce our forecast for Australia from 2.1% to 0.8% amidst advertiser cautiousness and political uncertainty.
 
 
Emerging markets reach 25% of global ad dollars

Growth in emerging economies continues to far exceed that in the developed markets, with +5.7% real GDP growth expected in 2012, up from +5.4% in January although down from last year’s +6.2% rate. Developing Asia is forecast to grow by +7.3%; a “soft landing” is predicted in China as weaker external demand is offset by robust domestic demand and the capacity for further policy easing. Economic growth is also slowing down in Latin America (Brazil and Mexico in particular). Real GDP growth is expected to drop to 3.7% from 4.5% last year and 6.2% in 2010. Inflation is receding too, which generates an ever sharper slow-down for nominal GDP growth – our benchmark for marketing expenditure growth.

While emerging economies continue to grow at much faster rates than developed markets, advertising growth generally outperforms economic growth. Emerging advertising markets are thus driving global growth, posting an average +11.9% growth during the year, with Emerging Asia increasing by +17.1% and Latin America by 9.0%. Among individual countries, the strongest growth rates will come from Argentina (+24.9%), Hong Kong (+18.8%), China (+18.1%), India (+13.4%) and Indonesia (+16.8%).

As a result of wildly contrasting trends, ranks and shares will be shifting quickly in the advertising world. Based on our 2012 growth forecasts, the US will remain the biggest advertising market, at $152 billion, three times the size of number two (Japan at $50 billion). Two BRIC countries are already in the top 10: China (#3 at $38 billion) and Brazil (#6 at $19.5 billion) and the other two will soon join the club.
 
In 2013, Brazil will outrank UK to become #5 and Russia will jump over Italy to take the #10 spot. By 2017, China will rank second, Brazil fourth and India seventh. Looking at regions, Western Europe will represent 22.4% of the global advertising market this year compared to 27% in 2000. Central and Eastern Europe tripled its share over the period, from 1.4% to 4.5%. Emerging Asia will account for 12.6% compared to just 3% twelve years ago. Latin America doubled its share of global advertising over the period, from 3.7% to 7.4%. Overall, developing markets increased their combined weight from 8.3% in 2000 to 24% in 2011 (outranking Western Europe) and to an expected 25.5% in 2012. In our long term predictions, emerging markets will attract a third of global ad revenues by 2017. North America remains the biggest advertising continent, with 34% of global ad dollars in 2012.
 

Internet hits 20% global share
 

Among media categories, television will increase its leadership in most markets, as it will benefit from the “quadrennial” events of 2012 (Summer Olympics, European Soccer Championship and US Election cycle). TV viewing grew in most markets in 2011 and the integration of time-shifted DVR viewing into TV ratings in additional markets (such as France last year) made the medium even more attractive. But mostly television benefits from ad budget transfers from the press, which remain a sizeable but declining medium in many regions. Globally television will increase by 5.2% to $195 billion, reinforcing TV’s leadership: 41% of all advertising dollars in the world are invested into television compared to 36% twelve years ago.

Global internet advertising revenues are expected to increase by an average 13.5% to approach the hundred billion mark ($97.6 billion).
 
“With a market share of 20.3%, internet becomes the number two media category globally, surpassing newspapers. It is already number one in a number of markets like Denmark and the UK. New formats (mobile, social and video), better and more integrated audience measurement and new trading mechanisms (programmatic buying and ad exchanges) continue to revolutionize online display.” said Vincent Letang, EVP, Director of Global Forecasting. Mobile advertising (search and display) will reach $6.3 billion in 2012, growing 50.2% and representing 6.5% of digital advertising on average. Search will grow by 15.6% to $45 billion. Newspaper advertising revenues will see a sixth consecutive year of decline at $85.5 billion (-1.0%).

The pace of decline will slow down compared to last year (-3.0%) due to the rise of emerging markets - where newspapers are still growing in readership and revenues - and the positive impact of sports events in developed markets. Without a similar driver, magazine revenues will fall by -2.7% to $35.4 billion. Radio will grow by 2.9% to $33.3 billion. Out-of-home media is also benefitting from quadrennial events, the election cycles in various important markets (including US and Mexico) and the continued roll-out of digital networks. Revenues are predicted to increase 5.1%.

For 2013, MAGNAGLOBAL is expecting a slightly lower growth (4.5%) followed by a re-acceleration in 2014-2016, based on macro-economic forecasts. Our five-year CAGR for the 2012-2017 period, stands at 5.8%. Again this will be the result of modest growth in North America (+3.4%) and Western Europe (+2.7%) on one hand, and double-digit growth in emerging markets (+12.5%) on the other hand.


The next MAGNAGLOBAL Forecast update will be published in December 2012.
 
About MAGNAGLOBAL Advertising Forecasts:

For more than 40 years, MAGNAGLOBAL forecasts have been the industry’s leading source for measuring and forecasting advertising revenues. MAGNAGLOBAL projects media owners’ advertising revenues in the US and around the world through financial analyses of media companies’ public filings, government reports, trade association data and local market expertise. MAGNAGLOBAL’s new methodology was introduced to the industry in 2009 and has redefined measurement for the advertising-supported media economy, delivering unparalleled authority and accuracy. Our Global Media Suppliers Advertising Revenue Forecasts include television (pay and free), internet (search, display, video, mobile), newspapers, magazines, radio, cinema and out-of-home (traditional and digital). Our report monitors media suppliers’ revenues in 63 markets, including all major countries, representing 95% of the world’s economy. It is updated twice a year. Our US Advertising Revenue Forecast model includes detailed data for more than 40 categories of media on a quarterly basis from 1990 to 2012 and on an annual basis from 1980 to 2017, updated quarterly. Please email vincent.letang@magnaglobal.com for further details.
 
About MAGNAGLOBAL:
 

MAGNAGLOBAL is the strategic global media unit of Interpublic Group, driving forecasts, insights and negotiation strategy across all media channels. The MAGNAGLOBAL Intelligence Unit delivers the industry’s most accurate and authoritative forecast of media value. The MAGNAGLOBAL Investment Unit harnesses $30 billion of Mediabrands global media billings. Follow us on Twitter for updates @MAGNAGLOBAL.

About IPG Mediabrands:

We were founded by Interpublic Group (NYSE: IPG) in 2007 to manage all of its global media related assets. Today that means we manage and invest $34 billion in global media. We employ over 6,500 diverse and daring marketing communication specialists worldwide and operate our company businesses in more than 90 markets. For more information please visit http://news.ipgmediabrands.com
 
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