ZenithOptimedia forecasts 5.4% adspend growth in 2005

Apr 18, 2005. /Lesprom Network/. ZenithOptimedia has upgraded predictions for adspend growth in each of our forecast years, reflecting growing confidence that this growth will be sustained.  We now forecast 5.4% growth in 2005 (up from 5.0%), 6.5% growth in 2006 (up from 5.8%) and 6.1% in 2007 (up from 5.8%).  Europe is the only region we have downgraded slightly (by 0.1 of a percentage point in 2005 and 0.2 of a point in 2006), principally because of continuing weakness in Germany.

Advertising is now growing as a proportion of world GDP for the first time since 2000 – it contributed 0.99% of the world’s economic output in 2004, up from a trough of 0.98% in 2003.  We expect advertising’s contribution to world GDP to continue to grow throughout our forecast period, as it normally does in times of economic confidence.  We do forecast adspend to decelerate slightly in 2005, but this is because of the absence of the Euro 2004 football competition, the Olympic Games and the US elections.

Television’s share of the ad market has been rising for many years – at least since 1980, when our records began – but we expect it to peak in 2006.  Television attracted 37.6% in 2004, up from 30.3% in 1980.  Its growth has been driven by deregulation of television markets, particularly in Europe; better audience measurement using peoplemeters, and the use of detailed demographics to segment audiences; the slow decline of newspaper and magazine circulation in developed countries; and the rise of the developing markets, which are characterised by heavy FMCG advertising on television.  However, we predict television’s share to fall slightly from 37.9% in 2006 to 37.8% in 2007 as advertisers divert more and more of their budgets to the internet.  We record only one previous instance (that was not a statistical artefact) in which television’s share of world adspend declined, and that was when the dotcom bubble burst in 2001.

The internet attracted 3.6% of total adspend in 2004, up from 3.2% in 2003.  It has a 5.4% share in the United States and a 7.7% share in Sweden (the country with the highest internet penetration in the world), and its share is still growing in both countries.  The internet’s share of world adspend could easily double in the longer term; we expect it to rise to 4.4% by 2007.

The internet is easily the fastest-growing medium – internet adspend grew 21% in 2004 and we expect it to grow in double digits in each of years we forecast.  However, the internet is by no means the sole driving force of growth: the traditional media are pulling their weight as well.  Adspend in the traditional media – excluding the internet – grew 7.0% in 2004.  We forecast it to grow 5.1% in 2005, 6.2% in 2006 and 5.7% in 2007.

Advertising expenditure

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

US$ million, current prices.  Currency conversion at 2003 average rates.

Year-on-year change (%)

Major media (newspapers, magazines, television, radio, cinema, outdoor, internet)

Regional shares of display advertising revenue (%)

Global shares of display advertising revenue by medium (%)

These shares sum to 99% because a few countries including Russia and the Philippines group newspapers and magazines together