Global Advertising Forecasts Drop: An Indicator for Uncertain Times

Implications: 1. Zenith Optimedia, Universal McCann, WPP, BMO Capital Markets, Oppenheimer, Lehman Brothers and eMarket all have announced downward revision of overall Ad spend for 2008           2. Nielsen Monitor-Plus: first-half U.S. ad spend declined 1.4 percent, compared with the same period in 2007, to $67.6 billion

Analysis:  As determined by Ad Age, the top 100 U.S. media companies realized only a combined 4.6% increase in 2007 revenues–the lowest since the 2001 recession. If there is one thing the “experts” have generally agreed upon, it is that 2008’s presidential election and Olympics year would be a bullish preface to a bearish 2009. That 2008 has rendered advertising deterioration may imply that 2009 could be worse than expected.

As for Ad spending updates: Universal McCann Research Chief Bob Coen had revised his 2008 U.S. ad-spending forecast to 2% of $285 billion, down from a original 5% growth prediction. Furthermore, Coen reduced his online display ad-spending forecast from 16.5% to 12% growth (or $11.7 billion) in 2008. We are also seeing Zenith Optimedia, WPP, BMO Capital Markets, Oppenheimer and eMarket announcing similar downward revisions. Some industry executives now believe this year’s Ad spend might actually end up in negative territory. They point to figures just released by Nielsen Monitor-Plus that show a first-half U.S. ad spend decline of 1.4 percent, compared with the same period in 2007, to $67.6 billion.
 
This pain is spreading to Europe’s advertising economy as well. As is so often the case, Europe has followed the U.S. into this economic malaise, and now Europe’s ad economy is taking a hit as well. Further, the pain is likely to spread to the ad economies of developing countries, such as China and India, which have seen huge surges in ad spending in recent years.

Unlike the advertising downturn in early 1980s in which it took two years for the slump in the U.S. to reach other advertising markets, the current European decline has occurred over the course of a few months.  The markets are extremely interconnected today.

Martin Sorrell, head of WPP, the global ad holding company, recently said that 2009 was already looking like a tough year for global Ad spending and that the economic turmoil spreading from the U.S. will make it even tougher. Sorrell doesn't expect the global ad economy to begin turning around until 2010.

One bright spot for media may be that advertising is a bellwether: It gets hit ahead of time, so by the point that things look extremely bleak, advertising has already been affected.