MAGNAGLOBAL Core Advertising Forecast - June 2011


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MAGNAGLOBAL Core Advertising Forecast - June 2011

  1. 1. PRESS CONTACT: 212.883.4736 MAGNAGLOBAL CORE MEDIA ADVERTISING FORECAST UPWARD REVISIONS TO GLOBAL ADVERTISING REVENUES AFTER A SLOWDOWN IN 2011New York, June 16, 2011 – MAGNAGLOBAL, a division of IPG’s Mediabrands, releases an updated Global advertising forecastalongside a comprehensive model including data for more than 60 countries covering years 2000 to 2016.Following an 8.0% rebound in 2010, we forecast that media suppliers around the world will grow their advertisingrevenues during 2011 by +5.2% to total USD$428.4 billion on a constant currency basis, revised downward from our previouslypublished expectations of +5.6%.Long-term growth rates, however, are upgraded, reflectingstronger expectations for emerging markets through 2016. Our Global Core Advertising Revenuescompounded annual growth rate (CAGR) for the global $600,000.0industry is +6.8% over the next five years, compared to Constant USD in Millions $500,000.0previous expectations of +6.3% in late 2010. $400,000.0Video bounced back strongly in 2010 and continues to be the $300,000.0dominant advertising medium, claiming over 40% of the global $200,000.0advertising market. Traditional television advertising is expected $100,000.0to grow 8.3% on average through 2016, gaining more advertisingmarket share in North America, the world’s largest TV market, than $0.0 2001A 2002A 2005A 2006A 2009A 2010A 2011E 2013E 2014E 2015E 2000A 2003A 2004A 2007A 2008A 2012E 2016Ein any other region. Concurrently, we expect online advertisingto overtake newspapers as the second-largest advertisingmedium by 2012, reaching USD$129 billion in 2016.Technological advancements in ad serving, targeting and measurement, improvements in search quality, and rapid growth of socialmedia will all help the medium attract more investment.By contrast, print media will see renewed weakness in 2011. We now expect a slight decline in revenue for the sector comparedto our previous expectation of positive growth of less than 1%. Over the next five years, however, newspapers and magazinescollectively should grow 1.6% on average, an upward revision from our previous estimate of 1.2%. In many emerging countries,particularly in those where literacy rates are rising and the threat of online substitutes remains limited, newspapers remain a popularmedium to distribute content to consumers. Our radio estimates remain largely unchanged, but out-of-home should continue to seerelatively more favorable trends, which will help make it the second fastest growing medium after online over the next five years.In dynamic USD terms – important to a media owner or advertiser who does not hedge currency exposure – global advertising willrise by +9.2% during 2011, and continue to grow by a CAGR of +8.1% through 2016. Our currency estimates assume adepreciating US dollar against most other currencies over the next five years.Regional OverviewAdvanced economies are showing signs of weakness this year as they confront several headwinds. In the US, the world’slargest advertising market, manufacturing activity is stagnating and sales of several key retailers missed market expectations inMay. While we see the disruption from the earthquake in Japan and high gas prices as temporary, the recent economic weaknessmay be protracted in light of a depressed housing market, sluggish employment conditions, and fiscal retrenchment at all levels ofgovernment. While these conditions impact the main drivers of our model, Industrial Production and Personal Consumption, wehave been appropriately conservative with our estimates for the year and have adjusted our forecast only slightly downward to+2.9% in 2011 from +3.1% previously, excluding the impact of political and Olympic advertising.In addition to weakness in the periphery, Europe’s major economies appear to be stumbling as well. Industrial output in Germany,the strongest of Europe’s major economies and the region’s key exporter, declined 0.6% in April from March. Though there may bevolatility in many economic indicators following the earthquake, there were signs Europe’s major advertising markets were slowingbefore the event. Developed markets in Asia Pacific are also showing some signs of a growth lull. Japanese exports declined9.3% in the first 20 days of May compared to a year ago after two months of declines. While this may strengthen the claim that itscustomers, the emerging economies, are also slowing, we believe the development of their advertising markets will offset any dragfrom slower economic growth.
  2. 2. Our revised advertising estimates for Asia Pacific reflect this: we see growth there slowing to 8.1% in 2011 from our previousestimate of 10.2% but over the long term we remain optimistic on these markets, which are forecast to grow 9.5% on average from2011-2016, modestly above our previous estimate of 9.4%. Latin America is forecast to remain strong in 2011, up 15.8%,approximately the rate we expect it to grow each year on average 2011-2016.China and India are expected to remain key drivers of the global economy. China’s advertising economy should grow 20.4%in 2011 to RMB188.7 billion or USD$28.1 billion and become the world’s second largest market by 2012, worth USD$33.6 billion ona constant currency basis. We expect it to nearly double that amount by 2016, assuming the country’s currency is allowed toappreciate. India’s advertising economy should rise by 21.6% during 2011, generating R243.9 billion (USD$5.3 billion). Over thenext five years, we see growth rates of 18.6% on average in local currency terms. Paired with currency appreciation, India’sadvertising economy should grow to USD$16.5 billion by 2016. Compounded Annual Growth Rates 2011-2016 by Medium 20% 18.1% 18% 16.9% 15.7% 16% 14% 12.3% 11.4% 12% 9.5% 10% 7.7% 7.2% 7.2% 8% 6.8% 6% 4.2% 4% 2.1% 2% 0.3% 0% Mobile Digital OOH Cinema Core Media Average Paid Search Broadcast Television Online Video Pay TV Radio Newspapers Other OOH Magazines Other InternetOur updated industry models with country-specific and media-specific data are now available. Please contact MAGNAGLOBAL for additional details