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Magnaglobal global advertising forecast 20 december 2011


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Key Findings

- 2011 global growth is revised down to +4.7% (downgraded by -0.5%), totaling $427 billion.

- 2012 global growth is revised to +5.0% (downgraded by -1.5%), totaling $449 billion.

- Quadrennial events, combined with the scale and dynamism of the BRIC countries will help sustain global growth despite worsening economic outlook. They contribute to 45% of the global growth in 2011.

-Internet will become the second biggest media category in 2011, reaching a 20% global market share in 2012.

- China will become the second largest advertising market in 2012, outgrowing Japan.

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Magnaglobal global advertising forecast 20 december 2011

  1. 1. FOR IMMEDIATE RELEASE PRESS CONTACT: 1.347.522.0563 MAGNAGLOBAL MEDIA OWNERS ADVERTISING REVENUE FORECAST: BRICs and Sports Will Help Global Advertising Revenues to Grow In 2012New York, December 5, 2011 – MAGNAGLOBAL, a division of IPG Mediabrands, released updated Global AdvertisingForecasts, showing media owners’ revenue growth for 2011 and 2012 to be slower than previously projected, but stillresilient.Key Findings  2011 global growth is revised down to +4.7% (downgraded by -0.5%), totaling $427 billion.  2012 global growth is revised to +5.0% (downgraded by -1.5%), totaling $449 billion.  Quadrennial events, combined with the scale and dynamism of the BRIC countries will help sustain global growth despite worsening economic outlook. They contribute to 45% of the global growth in 2011.  Internet will become the second biggest media category in 2011, reaching a 20% global market share in 2012.  China will become the second largest advertising market in 2012, outgrowing Japan.2011: The SlowdownIn 2011, media suppliers around the world will see their advertising revenues grow by +4.7% to total $427 billion (constantUSD 2010 basis). That estimate is down slightly (-0.5%) from our +5.2% forecast published in June 2011, due to the softening ofsome markets in the second half of the year. Our media suppliers advertising revenue projection includes: television (pay and free),Internet (search, display, video, mobile), newspapers, magazines, radio, cinema and out-of-home (traditional and digital). Itexcludes direct marketing categories such as direct mail or traditional "yellow page" directories. We monitor media suppliers’revenues in 63 markets (including all major markets), representing more than 95% of the world’s economy.The geography of growth. More than ever, emerging economies drove global advertising revenue growth in 2011, posting anaverage +15.0% growth during the year. Among these developing economies, Latin America posted the strongest growth rates,averaging +13.2%, closely followed by Central and Eastern Europe (+13.0%). Developed markets, meanwhile, grew at much slowerrates, such as +1.6% in Western Europe and +3.1% in North America, due to a number of factors including: a strong 2010comparison (revenues were up +8.2% compared with 2009); macro-economic slow-down and persistent financial uncertainties; theabsence of major sporting events or U.S. elections; and natural disasters in Asia. Among individual countries, the strongest growthrates came from: Argentina (+37.9% in the context of a strong inflationary economic growth), China (+22.5%), Kazakhstan(+25.6%), Russia (+20.4%), India (+15%) and Brazil (+10.2%). Eleven countries (out of the 63 analyzed by MAGNAGLOBAL)suffered a decline in advertising revenues, including countries in Southern Europe hit by protracted economic turmoil and politicalinstability (Greece: -19.3%; Portugal: -6.9%; Spain: -6.3%; Italy: -2.5%); emerging markets temporarily destabilized by the Arab
  2. 2. Spring (Egypt -21%); and Asian countries hit by natural disasters (Japan -2.0%, Thailand: -2.0%). Many of the large markets ofWestern Europe and North America wound up in the middle, typically showing low single-digit growth (UK: +1.8%; Germany:+3.0%; U.S.: +2.9%).Among media categories, television, an unexpected winner in 2010 (+12.7%), continued to show strength in 2011, despite theabsence of cyclical sporting events or elections in the U.S. Broadcasters’ advertising revenues grew +4.8% to $175 billion, in 2011,maintaining TV’s leadership with a 41.0% market share globally. Strong audience levels and audience measurement improvements– such as the integration of time-shifted DVR viewing into ratings for the first time (e.g. France) – made the medium attractive. Out-of-home (OOH) media fared even better. Including cinema, OOH grew +6.4% globally, driven by the incremental revenuesgenerated through digital billboards (+19.9%), which have rolled out in various parts of continental Europe and Asia. Othertraditional media categories, however, had a tougher year. Radio grew only +2.2%; newspapers’ revenues were down -2.4% andmagazines declined -0.9%. Declining circulation, shrinking readership, Internet competition and short term media buying patterns(which penalizes monthly magazines), all contributed to print’s decline in developed markets. Things are different in emergingmarkets, however, where literacy is still increasing and broadband access is still relatively low. In those markets, magazines aregrowing along with the middle class, and there is enough advertising demand for every media beyond TV to benefit. Overall, printadvertising revenues are up by high single digit percentage points in emerging markets.The big winner of 2011, however, was Internet media. Total Internet advertising revenues increased +16.9% to $78.5 billion. WhileDisplay subcategories increased +15%, Paid Search reaped the benefits of usage growth and algorithm improvements to reclaim itsposition as the largest digital revenue driver (+19%). Within Display, online video continues to show impressive growth (+58.5%),reaching $4.7 billion in revenues. Pre- and mid-rolls in online videos now generate 6% of total Internet advertising revenues andone percent (1.1%) of global advertising revenues. Even more than online video sharing specialists, TV broadcasters offering free,ad-funded online “catch-up” of long-form, full-length episodes are driving category growth.Overall, coming after a strong 2010 and in a poor macro-economic context, media suppliers displayed a resilient performance in2011. But the global market is barely back to where it was in 2007 ($423 billion in constant USD), and still smaller in the case ofWestern Europe (2007: $112 billion, 2011: $106 billion). This reflects that media costs that are still low from a historical perspective.2012: The BRIC EngineFor 2012, we now forecast media owners’ advertising revenues to grow by +5.0% to $449 billion. This is -1.5% below our previousprediction published in June 2011 (+6.5%).This downward revision is due to deteriorating macro-economic perspectives. Our forecast model is based on current, officialeconomic forecasts that are generally predicting weaker – but still positive – growth next year. However, the uncertainty remainshigh, especially in Europe. In September, the IMF reduced its global output forecast (real GDP growth) from +4.5% to +4.0%.Although that forecast suggests the world economy would still grow, it’s an awkward average between emerging economies thatare growing at healthy rates and developed economies that are still sputtering (average +1.9%, US: +1.8%). In late November,OECD revised its own global output forecast to +3.4% (including +1.6% for OECD countries and only +0.2% for the Euro area)
  3. 3. warning that 4Q11 and 1Q12 could tip negative in most European countries, in line with 3Q11 slowdown. Greece, Italy andPortugal, in particular, are now expected to suffer full-year recessions in 2012. Other economic indicators (industrial production,personal consumption and business confidence) have been similarly downgraded in recent months and some independentforecasters have expressed increasingly gloomier views.Despite the worsening economic outlook, we are still projecting a positive growth rate based on a few factors:  First, the well-known “quadrennial” cyclical driver is back, and we believe it will be stronger than ever. The incremental ad spend generated by major sporting events (London Summer Olympics, Poland/Ukraine European Soccer Championship) and the U.S. Presidential Elections will bring an additional +1% to +2% on top of organic revenue growth across markets. In the U.S., Political and Olympic (P&O) money will account for three billion dollars of incremental ad spend, mostly on television ($2.4 billion related to the Elections, $600 million generated by Olympic Broadcasts). Meanwhile, major sporting events will help in European markets that are otherwise hit by economic stagnation, such as the UK (which is hosting the Olympics, although the games are broadcast on the ad-free BCC) and Italy (where the Games and Soccer tournament will mostly be broadcast by RAI, one of the few European public television groups still allowed to carry a full, all-day advertising load).  Second, big emerging countries will increase their share of global economic and advertising influence. At the end of 2012, emerging markets will represent 24% of global advertising revenues (compared with 7% in 1999) and the four BRIC countries alone will account for 14% (compared with 3% in 1999). Adding scale to dynamism, the BRIC markets have the capacity to offset part or all of the Western weakness. The four BRIC markets equated to only 10% of Western Europe’s advertising revenues in 1999. That ratio will grow to 59% by the end of 2012, and by 2016 the BRIC countries will almost match the size of Western Europe (94%). The BRIC countries contributed to 45% of the global market growth in 2011 ($9 billion out of $19 billion). With a growing proportion of the BRIC countries’ population adopting Western-style media consumption patterns, and with Western and local brands competing for top-of-mind among the emerging middle class, media demand is in excess of supply and inflation reigns. BRIC countries lag behind the global average advertising spend per capita ($80) – Russia: $70, Brazil: $60; China: $21, and India: $4. With such structural factors, we expect advertising spending and revenues in those markets to keep growing faster than the general economy, supporting global revenues in their wake.  Thirdly, some lessons learned in 2009 may help avoid a replay. Some major advertisers, e.g. in FMCG, have since admitted that they may have over-reacted back then by cutting advertising expenditures too hard and too quickly, harming their brands. We believe that this time, even if sales forecasts are being revised downwards, marketers will remember that market shares are subject to losses or gains, including – and perhaps even more so – during a recession, as consumers reconsider their choices. In addition, the Western advertising market is still smaller than five years ago, which means prices and net costs per thousand - despite some inflation in 2010-2011 - are still competitive and attractive by long term standards. Therefore, brands in various sectors have both the incentive and capacity to invest smartly to boost or defend their market shares.
  4. 4. In 2012, advertising revenues will grow by +12.4% in emerging economies, with Latin America still leading the charge (+13.0%)followed by Central and Eastern Europe (slowing down at +7.7%). Asia Pacific will re-accelerate to +8.3% due to the recovery ofJapan and the continued growth of China. Western Europe will slow down at +1.1%. The sports driver will not be enough to offsetrecession in many European countries: Greece, Portugal, Spain, Ireland will decrease again (between -2% and -6%); Italy andFrance will be flat at best. UK and Germany will grow below +2%.The biggest growth rates of 2012 will come from Argentina (+26.4%), Ukraine (+21.0%), Indonesia (+16.0%), China (+16.1%),Brazil (+12.0%), India (+13.5%) and Russia (+9.6%).In terms of media market share, Internet will grow by 11.2% and outrank newspapers to become the second biggest mediacategory globally, accounting for nearly 20% of global advertising dollars (19.5% at $87.4 billion). The category already stands at23% in both North America and Western Europe (where it even takes the #1 spot in a few markets, such as the UK). Television willreceive the bulk of the “quadrennial” bonanza and will benefit from the typical concentration of advertisers into leading media at theexpense of secondary media during harsh times. TV will grow by +6.7% globally to $187.1 billion. Newspaper and magazinerevenues will shrink by an average -1.0% and -1.3% respectively, with much deeper drops in Western markets, where circulationlosses of 2011 will be reflected in 2012 ad pricing. Radio will grow by +1.6% to $30.4 billion. OOH will also benefit from the“quadrennial” events and the roll-out of new digital (+6.3% to $28.3 billion) platforms. In the UK, the innovative upfront auctionprocess conducted last summer to allocate the most premium London inventory during the Games did not quite meet the highexpectations, but the industry is still expected to grow healthily next year.China Takes the #2 SpotChina’s advertising market is expected to continue outperforming its already impressive economic growth in 2012, with a +16.1%growth. At $33.3 billion, China will become the second biggest advertising market, ahead of Japan, now third at $32.1 billion.Germany remains the fourth biggest market, some distance behind ($25 billion). Other top 10 markets are – in order - UK, France,Brazil, Canada, Australia and Italy. Russia will enter the top 10 in 2013, at the expense of Italy. Chart 1: Top 10 advertising in 2012 (constant USD 2010) Rank Country USD % 1 United States 152,887 34.0% 2 China 33,258 7.4% 3 Japan 32,113 7.2% 4 Germany 24,769 5.5% 5 United Kingdom 19,619 4.4% 6 France 14,582 3.2% 7 Brazil 13,134 2.9% 8 Canada 12,384 2.8% 9 Australia 12,167 2.7% 10 Italy 11,337 2.5% Top 10 326,250 72.7% Grand total (63 countries) 449,019 100.0%
  5. 5. Chart 2: Global Media Owners Advertising Revenues (2006-2013)600 10% Advertising revenues in billions of constant USD (left scale)550 Annual growth/decline (right scale)500 5% 471.2 449.0450 422.8 423.2 427.6 401.5 408.3400 0% 377.5350300 -5%250200 -10%150100 -15% 06 07 08 09 10 11 12 13 Chart 3: Global Advertising Growth by Media Category (2011-2012)20.0% 16.9%15.0% 11.2%10.0% 6.4% 6.7% 6.3% 5.0% 4.8% 4.7% 5.0% 2.2% 1.6% 0.0% Television Internet Newspapers Magazines Radio OOH All Media -0.9% -1.0% -2.4% -1.3% -5.0% 2011 2012
  6. 6. About MAGNAGLOBAL Forecasts:MAGNAGLOBAL forecasts are the industry’s leading source for measuring and forecasting the growth of advertising revenues formedia companies. MAGNAGLOBAL projects media owners’ advertising revenues in the US and around the world through financialanalyses of suppliers’ public filings, government reports, trade association data and local market expertise. MAGNAGLOBAL’s newmethodology was introduced to the industry in 2009 and has redefined measurement for the advertising-supported media economy,delivering unparalleled authority and accuracy. Our next global forecast update will be published in June 2012. Please contact usfor further details at MAGNAGLOBAL:MAGNAGLOBAL is the strategic global media unit of Interpublic Group, driving forecasts, insights and negotiation strategy acrossall media channels. The MAGNAGLOBAL Intelligence Unit delivers the industry’s most accurate and authoritative forecast of mediavalue. The MAGNAGLOBAL Investment Unit harnesses $30 billion of Mediabrands global media billings. Learn more and follow us on Twitter for updates @MAGNAGLOBAL.About MediabrandsCreated by IPG to manage all of its global media-related assets, Mediabrands employs 6,500 communications specialists operatingin 90 countries and manages $34B in global media billings. A proven entity in helping clients maximize the impact of theirmarketing investment to deliver explosive business results, Mediabrands enhances the communications offering and performanceacross its network of media agencies including Initiative, UM, MAGNAGLOBAL and a roster of Specialty Service Groups.Mediabrands is part of Interpublic Group (NYSE: IPG), one of the worlds leading organizations of advertising agencies andmarketing services companies. For more information, please visit ###