Global adgrowth downgraded to -9.9%. Internet advertising up

Zenithoptimedia has downgraded ists advertising spend forecast for 2009. Here’s the text, for the full release and tables go here.

New information about weak first half causes ZenithOptimedia to downgrade its global ad growth forecast for 2009 to -9.9%

• The second half is developing in line with predictions, demonstrating clear improvement in the rate of decline
• Developing markets to grow a healthy 7.8% in 2010 and 9.8% in 2011
• But structural economic problems will drag developed markets down 2.9% in 2010, before modest 1.5% recovery in 2011
• Internet advertising to grow 9% this year, and reach 14.9% share of global ad expenditure by 2011
• Newspaper and magazine ad expenditure will shrink every year over our forecast period, falling to 25% and 28% below their respective 2007 peaks by 2011

More details have emerged about how painful the first half of 2009 was for the media industry. The world’s largest media owners suffered an average 13.1% drop in their media revenues in the first six months of the year, and this probably understates the decline suffered by the industry as a whole. The average figure does not include the results of the US publisher and broadcaster Tribune Company, which entered Chapter 11 bankruptcy in December 2008. It does include 4.0% growth from Google, which has been the main beneficiary of growth in internet advertising – the only form of advertising that has continued to grow. Apart from Google, every one of the top media owners shrank in the first half of 2009.

In the light of these results we have revised downwards our forecasts for global ad expenditure growth this year to -9.9%, from the -8.5% we published in July. However, this downgrade almost entirely relates to first-half activity. Since then improvements in economic confidence have been accompanied by positive signals from media owners that the downturn is bottoming out. We are still confident that the second half of the year will be much less painful for the ad market than the first half, and expect the market to hit bottom before the end of 2009.

We now forecast a meagre 0.5% recovery in 2010, down from 1.6% in July. This figure marks a sharp disparity between developed markets, which we expect to shrink another 2.9%, and developing markets, which we expect to grow by a very healthy 7.8%. (Here we define developed markets as North America, Western Europe and Japan, and developing markets as everywhere else.) The credit crisis has exposed deep structural problems in developed economies that will take years to resolve, and there remains plenty of uncertainty over the timing and scale of recovery as governments struggle to maintain spending in the face of ballooning debt. In contrast, many developing markets have continued to grow throughout the crisis, and others look well positioned for a strong recovery in 2010. Ad expenditure has continued to grow in 27 developing markets this year, and we predict that number will nearly double to 52 in 2010.

All developed markets are shrinking this year, but we expect nine to return to growth in 2010. Looking to the longer term, we predict 4.3% growth in global ad expenditure in 2011, with all regions experiencing at least some expansion. This number – unchanged from our July forecast – is somewhat below the 5%-6% average growth rate for the global ad market, but would represent a welcome step towards normality.

We expect developing ad markets to accelerate to 9.8% growth in 2011, while developed markets experience a mild 1.5% recovery. Developing markets’ share of global ad expenditure is rising rapidly: we forecast it to reach 35% in 2011, up from 29% in 2008.

The internet is the only medium we expect to grow in 2009, by 9.2%. This is slightly lower than the 10.1% growth we forecast in July, but we have downgraded internet advertising by less than the market as a whole. Most of this growth is coming from paid search and innovative formats. In the US – where we have the most detailed breakdown of internet advertising by type – we forecast paid search will grow by 20% in 2009, while internet video grows 19%, social media grows 45% and mobile grows 69%. Traditional display and classified are practically static in comparison: we forecast them to grow by 3% and 2% respectively this year. Globally, we predict internet advertising to account for 14.9% of all ad expenditure by 2011, up from 10.2% in 2008.

All other media are shrinking. Most are shrinking at around the market average rate, but newspapers and magazines are in steep decline: we forecast newspaper ad expenditure to fall 17% this year, and magazine ad expenditure to shrink 20%. In both cases this is a particularly severe example of a longer-term trend; these media have been in decline since 2007, and we expect them to remain in decline for the rest of our forecast period. By 2011 we forecast newspaper ad expenditure to be 25% below its 2007 peak, while magazine ad expenditure is 28% below its own peak. Prospects for other media are more encouraging: we expect television, cinema and outdoor advertising to return to growth in 2010, followed by radio in 2011.