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Banks, Financial

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Categorized | Economy

Eurozone crisis hits advertising spending

Posted on September 30, 2012

Centerbridge Partners

Global advertising spending is slowing in response to a eurozone crisis that has cut billions from marketing budgets in the hardest-hit countries and started to affect brands’ confidence in other regions, according to a new forecast.

ZenithOptimedia has cut its forecast for global advertising growth this year to 3.8 per cent, compared with its June forecast of 4.3 per cent and its expectation last July that the quadrennial boost of the Olympic Games and the US election would drive growth of 5.9 per cent.

    The Publicis-owned media services agency has also cut its forecast for 2013, from 5.3 per cent growth to 4.6 per cent, and for 2014, when it predicts growth of 5.2 per cent rather than 6.1 per cent.

    “The clear change is the further deterioration of the eurozone,” said Jonathan Barnard, ZenithOptimedia’s head of forecasting. “Advertisers have taken a fairly hard look at their budgets and decided they were planning to spend too much this year. They have cut back but they are also projecting lower growth in the next couple of years.”

    Advertising spending across the eurozone is expected to fall 3.1 per cent, despite modest 1.1 per cent growth in the large German market.

    Greece could suffer a 33 per cent drop, with Spain and Portugal each down 12-13 per cent, ZenithOptimedia predicts.

    By the end of the year, the Greek advertising market will be 63 per cent, or €2.3bn, below its 2007 peak and Spain will be 39 per cent, or €4bn, down from pre-crisis levels, Mr Barnard said. Few markets have ever seen such sharp drops, other than Russia and Argentina in past financial crises. Advertising agency groups reported a slowdown in the second quarter of the year, when Nielsen said last week global advertising spending had risen by just 2.4 per cent year on year.

    Budgets in Europe contracted by 3.8 per cent in the quarter, Nielsen estimated. The eurozone crisis is likely to accentuate advertisers’ focus on emerging markets, which ZenithOptimedia estimates will contribute 59 per cent of all the growth in advertising spending between 2011 and 2014.

    Latin America, where growth dipped from 10.5 per cent to 7.7 per cent this year, should return to double-digit growth rates in 2013, it predicts, and central and eastern European markets should rebound from 1.8 per cent to 7.4 per cent growth. One exception is the Middle East and North Africa, where unrest after the Arab spring has made marketers nervous.

    The new forecast confirms the growing importance of internet advertising, which is set to rise from 16 per cent of global spending in 2011 to 21.4 per cent in 2014.

    But it also underscores the primacy of television, which drew a record 40.4 per cent of advertising spending in 2012.