Forecast: Global advertising market will linger on the edge of the cliff

Although economic instability has led to a weak global advertising market, China's advertising revenue growth remains one of the bright spots in the world. China's real GDP growth is expected to grow to 7.8%, although this data is lower than the forecast in early 2012, but China has continued to maintain a soft landing.

Advertising revenue in China is expected to grow by 9.3% this year, below initial forecasts and +21.4% per cent last year. This still comes mainly from the strong growth in digital advertising revenue (+34.6%), which has become the world's second-largest digital advertising market.

China's advertising consumption per capita is 28 U.S. dollars a year, and the world is 91 U.S. dollars, so China's advertising revenue is expected to accelerate further growth. Growth is expected to rise slightly to +9.5% per cent next year and will return to a lower double-digit growth rate by 2017, when online advertising revenue will surpass television advertising revenue and become the media with the highest advertising revenue. China's advertising revenue amounted to 245.823 trillion yuan, to 38.024 trillion U.S. dollars, become the world's third largest advertising market.

Main points:

MAGNA Global predicts that advertising revenue for media companies will grow by +3.1% in 2013. This data is 1.4% lower than the forecast data (+4.5%) released earlier in June 2012.

The main reason for this is the slowdown in economic growth in Europe and the United States, and the outlook remains uncertain. In addition, in the second half of this year, media companies are also more cautious about marketing inputs.

Global advertising market revenue of this year amounted to 495 billion U.S. dollars, an increase of +3.8%. The United States is still the largest market with advertising revenue of $153 billion trillion. Japan, China, Germany and Britain are among the top five.

In the 2012, U.S. ad market revenue rose by 4% per cent as a result of increased advertising revenue from politics and the Olympics (P&o). As Magna Global predicted a year ago, the US election cycle is by far the largest. Total for the market brought an increase of 3 billion US dollar advertising revenue, most of them for local television advertising revenue.

In the 2013, with no such drivers, and in a strong contrast this year, advertising revenue growth in the United States will flatten out: estimated at +0.6% (excluding the political and Olympic growth factors this year, expected to be +2.6%).

The economic situation in Western Europe remains grim. 2012 negative advertising revenue, to 2.8%, is expected to remain negative in 2013 (-0.1%). Advertising revenue in southern Europe is expected to be negative in 2013 (4.3%), but there will be modest growth in Germany and Britain.

By contrast, advertising revenue in Central and eastern Europe is expected to rise by +7.0% in 2013, with growth in Latin America reaching +11.9% per cent and Asia-Pacific growth at +4.8% per cent. With the economy "soft landing" in 2012, advertising revenue growth in the BRICS countries (China and India) fell to single-digit numbers.

Advertising revenues in the two countries are expected to return to two-digit growth in 2013-2014, while Russian advertising revenues will continue to grow strongly, while Brazil's advertising revenues are expected to benefit in 2013 as a result of the 2014 football World Cup.

2012: +3.8% Increase in advertising revenue

In 2012, global media companies are expected to earn 479.9 billion dollars in advertising, an increase of +3.8% (based on 2011-year revenue, converted to dollars at fixed exchange rates). This data was lowered by 1% from forecasts released in June 2012, mainly to the Western European market, which has been lowered (from 0.2% to 2.8%).

MAGNA global projected negative growth in advertising revenues in all of southern Europe this year (Greece, Spain, Portugal, France and Italy) this June. Negative growth ranged from a moderate negative decline in France (2.5%) to Italy, Spain and Greece (-28%). Other Western European and Nordic markets (Belgium, the Netherlands, Denmark and Finland) will experience more moderate negative growth. In stark contrast to other regions, Europe's two largest markets, Germany and Britain, will grow, with growth expected to be +0.5% and +2.2%, respectively.

In most parts of Central and Eastern Europe (including Hungary, Croatia, Romania, Bulgaria, Poland and the Czech Republic) there will be negative growth, but the CEE from Russia (+10.4%) and Turkey (+8.4%) will offset this negative impact. Advertising revenue in the region is expected to increase by 5.5%.

The North American market is slightly better than Europe this year. Advertising revenue for U.S. and Canadian media companies will grow by +4.2%. Advertising revenues in the United States have grown by almost +4.0% to record highs, but half of that growth has come from political and Olympic incremental advertising revenues, so the potential demand for the second half will be lower.

The average growth in advertising revenue in Asia-Pacific is +5.5%. Growth in emerging Asian markets slowed year-on-year, particularly in China (+9.3%) and India (+2.6% per cent), but other regions grew strongly, up by +8.4% per cent. A positive message for the region this year is that the tsunami-affected country's advertising revenues, after four consecutive years of negative growth, are finally growing and rising more than expected (+4.1%).

There was a slight negative growth in advertising revenue in Australia (-0.5%). Despite the slowdown in Latin America, advertising revenue rose by +13% per cent because of price inflation in some markets. Advertising revenues in Brazil rose by +13%, Argentina at +22%, while Mexico grew more modestly (+6.4%).

From the media category, television advertising revenue continued to grow in 2012 (+5.0%), thanks to the four annual event. This contrasts with the negative growth in advertising revenue for newspapers (-4.5%) and magazines (-5.7%), with newspapers and magazines facing a triple whammy of shrinking subscribers, reduced demand and lower prices for digital rivals.

While radio audiences are shrinking this year, advertising revenue is still growing (+1.6%), in part because broadcast advertising costs are not high and flexible, and are often used to boost traffic and promote when brand activity is reduced as a result of the recession. Thanks to the four-year event, outdoor advertising revenue has continued to grow (+6.1%), and its organic growth still comes mainly from the growth of digital advertising.

Due to slow economic growth and weak demand for advertising, the global four-year campaign in 2012 contributed little to global advertising spending and resulted in regional differences. In the United States, the London Olympics attracted a large audience, authorizing broadcaster NBC to benefit from television and digital platforms, taking some market share from its direct rivals, but increasing national television spending as a whole.

However, in most other markets, this activity has a general or even adverse effect on the promotion of television advertising revenue. Britain is the best example of this paradox: since the BBC, which does not advertise, is fully broadcasting the games, most viewers have been transferred from commercial channels to the BBC for three weeks, although a handful of Olympic sponsors have raised their annual ad net spending, but more non-sponsors think this year's advertising market is fiercely competitive, And the market has the possibility of inflation, so they decided to withdraw.

In fact, only outdoor advertising media companies have clearly benefited from the London Olympics. This is true in most parts of Europe, where television broadcasts are owned by state-run television, most of which do not broadcast advertisements in prime time. The European Cup tournament, which is broadcast on commercial radio or television, which is more often advertised, contributes more to European media companies.

2013: Projected advertising revenue growth of +3.1%

According to the International Monetary Fund's October forecast, the global economy will grow modestly in 2013, with the average global real GDP growth averaging +3.3%. This data is slightly below the IMF's July Forecast (+3.5%). Economic growth in the developed economies is expected to be only +1.3%, but the differences between economies will be large, with the United States slowly and smoothly recovering (+2.2% per cent), while the eurozone will remain weak (-0.4%). The OECD recently cut its forecasts for member and eurozone growth to +1.4% and 0.4% respectively.

The forecast for 2013 growth in advertising revenue for media companies was revised from +4.5% in June to +3.1%. The forecast is premised on the assumption that neither the US nor Europe will fall into their respective fiscal and debt cliffs, and that current economic forecasts can be achieved. It is expected that in the 69 markets included in the study, advertising revenue in 57 markets will grow and only 12 will have negative growth. This was better than in 2012, with 22 of the 69 markets showing negative growth in 2012.

Western Europe will continue to face severe economic conditions and austerity policies. As the debt crisis has not subsided, the advertising market in Spain, Italy, Portugal and Greece shrank by 34% compared with 2007, and advertising revenues are expected to remain negative in 2013 (4.3%). The French market will also show negative growth (0.9%). We expect advertising revenues in the UK and Germany to continue to grow (+1.9% and +0.8%, respectively), as they did in 2012, but that will not change the trend of negative growth in the entire region in 2013 (-0.1%).

Advertising revenues are expected to grow in the region for 2014 years (+1.6%). The Central and eastern European markets are expected to be more dynamic, with an average ad revenue increase of +7.0%, with strong growth in the Russian and Turkish markets and continued stagnation in the Polish market. Advertising revenues in the Middle East Africa market are expected to grow by an average of +6.4% per cent, driven by Egypt (+9.1%) and South Africa (+7.1%), after a strong recovery in the 2011 Arab Spring and 2012.

In Asia, advertising revenue in India is expected to accelerate again after a temporary slowdown in 2012, expected to grow by +8.7%. As the likelihood of a soft landing (GDP growth of +7% to +8%) increases, China's advertising revenue is expected to grow by +9.5% in 2013 and two-digit growth in 2014.

In the long run, there are two factors supporting the continued growth of advertising revenue in China and India: The per capita advertising consumption is very low (China's per capita advertising consumption is $28 trillion, India is 6 U.S. dollars, and the world is 91 U.S. dollars); and with only a handful of western brands likely to stay ahead for a long time, Global advertisers need to attract a rising middle class, seize the window of opportunity and become a leading brand. The reality is that competition for the leading position will continue. For example, China's car sales growth has slowed temporarily, but does not mean that carmakers will reduce their marketing investment in the medium term.

For the rest of Asia, Japan is expected to face economic stagnation again, so its advertising revenues will stagnate (+0.2%) and Australia will maintain a modest growth (+1%). Advertising revenues in most of Asia's emerging markets are expected to experience rapid growth: Malaysia (+9.7%) and Vietnam (+15.7%).

In Latin America, advertising revenue for media companies is expected to grow by +11.9% in 2013 (Mexico: +6.4%, Brazil: +10.7%, Argentina: +22.2%, Venezuela: +15.7%) The general economic and media economic inflation will continue to boost advertising spending. According to the MAGNAGLOBAL2012 annual media cost study, the region's 2013-year television advertising costs are expected to grow by an average of +13%, while newspaper advertising costs have grown by an average of +20.5%.

Advertising revenues are expected to grow even higher in some countries, such as Argentina. Despite the economy's problems, 2013 's advertising revenues are expected to benefit from the upcoming 2014 FIFA World Cup. In particular, television advertising, 2013 and "futebol" related to the brand of television advertising demand has begun to increase.

Advertising revenue growth in the US market will slow, which is common in the second year of the election. U.S. advertising revenue is expected to grow by +0.6%, excluding political and Olympic growth factors, expected to be +2.6%. Of course, the assumption is that the government will avoid falling into the fiscal cliff by the end of December, or that economic growth would be dragged down by several percentage points into recession.

With weak demand and the pendulum effect of the second year after the election, 2013 U.S. television advertising revenue is expected to show negative growth (-1.9%). Without the impetus of the Olympics and the shrinking of the long-term audience, advertising revenues from the U.S. National English Channel Network are expected to be negative (-3.6%). Without political advertising spending, local TVB's advertising revenue is expected to show negative growth (-9%). The number of viewers of cable television is expected to be less cyclical, and advertising revenue will increase (+4.6%).

Digital advertising revenue is expected to grow by +11.6%, and newspaper and magazine advertising revenues will be negative, with 6.7% and 7.8%, respectively. It is expected that the revenue from broadcast advertising will be unchanged from the previous year, while the revenue from outdoor and hospital advertising will increase (+4.4%).

Globally, in 2013, newspaper advertising revenues are expected to show negative growth for the seventh consecutive year (3.4%), as few emerging markets have grown enough to offset negative growth in developed markets. Due to the double pressure of television advertising and the increasing precision of digital media advertising, it is expected that the magazine advertising revenue will also be negative (-4.3%).

Revenue growth for Global television advertising is expected to fall to +2.3% per cent in 2013 as the US market (US TV advertising revenue is $62 billion trillion, accounting for one-third of global Television advertising revenues of $202 billion). It is expected that outdoor advertising revenues (including revenue from hospital lines) will grow by +3.4%. Broadcast advertising revenue will grow by an average of +1.5%. Since the cost of broadcasting advertising is five times times lower than that of national television commercials, eight times times lower than print advertising, there is a demand for broadcast advertising, and growth is expected to be achieved by 2013.

Digital media advertising revenue is expected to grow by +13.5%; The revenue from traditional PC display ads (banners, sponsorships, etc.) will grow by only +6%, as the focus shifted to online video and mobile services, and revenue from paid search is expected to continue to grow strongly (+14%).

"The tablet is the fastest-growing device and its users have reached 50 million people in less than three years," said Vincentletang, executive vice president and global predictive director and author of the report. As prices have fallen, we have seen the demand for tablets and the rapid growth in the use of mobile media.

Marketers have come to accept and take advantage of this new marketing and branding opportunity: Global Mobile advertising revenue has reached $6 billion trillion, accounting for 6% of digital advertising revenue and 1% of total advertising revenue. By 2017, Magnaglobal expects mobile advertising revenue to reach $24 billion trillion, accounting for 14% of digital advertising revenue and 4% of total advertising revenue. ”

2014 and beyond: driving and impeding factors

Despite a stronger growth in advertising revenue in 2014, the medium range forecast has been slightly lowered as the global economy stabilizes. It is now estimated that 2014 advertising revenue has grown to 6% (the previous forecast was 6.3%), and 2015 was 4.9% (the previous forecast was 5.3%) but the factors that led to the slowdown remain.

There is a shift to digital advertising and the deflationary pressures it causes. MAGNAGLOBAL2012 Annual media cost research reports show that in the 40 markets examined, the average cost per person (CPM) for newspaper advertising was 39 U.S. dollars, while magazine advertising was 21 dollars. This is much higher than the cost of television advertising, more than five times times the cost of online display ads.

At the same time, with the continued development of planned purchases, the cost of online advertising has become lower. A recent Magnaglobal report predicts that 43% of us online display ads will be traded through a planned mechanism (or exchange) by 2017. At the same time, higher-cost advertising, such as online video, would lower prices and make their CPM consistent with wireless TV commercials.

Digital media space deflation means that as marketers shift budgets from traditional media to digital media to attract consumers, they also use the advantages of media mix to reduce costs. Unless they find the market increasingly competitive or already intense, they are unlikely to be saving money to increase advertising pressure or advertising share. It is expected that in 2014-2017, with the share of digital media advertising revenue reaching 20% and the wide application of planned buying tools, the mechanism will first appear in developed markets and will gradually affect some emerging markets.

Among the driving factors, it is worth mentioning the innovation, positioning and realization of revenue in customer group analysis, as well as the ability to transform oneself in some traditional media categories (such as digital form increases the profit and profit of outdoor advertising). In addition, increased educational attainment and media development in developing countries and regions will create opportunities for marketers to reach out to new consumers.