NEW YORK — Economic gridlock in the U.S. and a persistent financial crisis in the Eurozone have led GroupM to revise its worldwide advertising spending forecast for 2014 downward to 4.6 percent from the 5.1 percent hike predicted earlier this year.
The revised forecast was made in GroupM’s biannual worldwide report, “This Year, Next Year,” which also predicted that 2013 worldwide advertising spending in measured media will hit $508 billion, a 3.3 percent increase over 2012 spending of $492 billion.
The 74-country forecast predicted that global ad spending in 2014 will increase 4.6 percent compared to 2013, representing $531 billion. The report was prepared by GroupM Futures Director Adam Smith and was released today at the UBS Global Media and Communications Conference in New York.
For the U.S. market, the report said advertising investment in measured media grew 1.8 percent in 2013 to $156.3 billion, up from $153.5 billion the previous year. For 2014, the revised forecast predicted a 2.9 percent increase to $161 billion.
“Ad spending in 2014 will enjoy a slight bump thanks to the Winter Olympics in Sochi, with spending coming mostly from existing budgets,” said GroupM Chief Investment Officer Rino Scanzoni. “But overall we estimate only marginal U.S. growth on a comparable component basis.”
Worldwide, Smith said there is local, specific support for ad spending growth but he added that total global spending remains vulnerable to a wider economic downside. Still, there were a few bright spots in his forecast.
For example, he said China remains the largest single source of ad spending growth, accounting for 37 percent of new dollars in 2013 and a projected 31 percent in 2014.
“This is a high share of contribution compared to past results,” Smith said. “A sign of the Chinese market’s maturity is that advertising's share of the country’s GDP is already on the global average and has barely changed since 2008. We might therefore expect the pace of future advertising investment growth to match GDP growth, which remains around 10 percent annually in cash terms.”
Smith added that digital ad spending represented 24 percent of China’s measured media investment in 2013, which he said was comparable to the Western European average and another indicator of China's ad maturity.
The report also indicated that ad spending in the UK is strong and is predicted to grow 7 percent in 2013 and 6 percent in 2014. The UK is the world's fourth-largest ad market (after the U.S., China and Japan) and the third-largest contributor to ad growth in 2013 and 2014, Smith said.
However, even with robust ad spending in the UK, Western Europe remains in ad recession with a projected 1 percent decrease in spending expected in 2013.
“Central and Eastern Europe ad spending growth remains in high single digits, thanks mainly to Russia and Turkey, bringing the whole continent of Europe to net zero ad growth for the year,” Smith said. “We predict Western Europe advertising will return to modest 2 percent growth in 2014, but this depends on stability being restored to the troubled Eurozone periphery.” Smith said the countries in that area (Italy, Spain, Greece, Ireland and Portugal) have seen ad spending contract 40 percent from its 2007 peak, including a predicted 10 percent decline in 2013.
The report predicted that investment in digital media would account for 19 percent of measured ad spending globally this year ($97 billion) and 21 percent in 2014 ($110 billion), with respective growth rates of 15 percent and 14 percent. Those figures are comparable to the GroupM forecast made earlier this year.
Smith noted that, as in past reports, most of digital’s share growth came at the expense of print media (newspapers and magazines). Television’s share of overall global ad spending remains stable at around 45 percent.
Copies of the full report are available to the media on request.
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