Though UK advertiser investment committed for 2008 is staying put, discretionary spending is becoming shorter-term, at or slightly short of budget; still, WPP‘s GroupM forecasts 4% growth in 2008 and 3% in 2009 for the UK, thanks to internet advertising.
However, that’s down from its December forecast of 6% for 2008.
Moreover, noting that economic growth is below trend, which tends to destabilize advertising, it said the 18-month forecast period “could turn toxic” if negative equity and unemployment become serious worries.
“All forecasts of 2009 are therefore more than usually provisional, and we do not expect the outlook to become any clearer until the fourth quarter,” it said.
Despite the forecast growth for this year and next, traditional media are already suffering 2% annual recession, according to GroupM.
“Traditional UK media advertising (i.e., everything but the internet) has actually lagged well behind the economy for a decade now, through boom and bust. This is because of much harder competition for audience and advertisers within each medium and against the internet,” said Adam Smith, GroupM Futures Director and author of the This Year Next Year forecast.
“From the advertiser’s perspective, UK media is much more competitive and productive than it was in any prior boom or bust. If media cannot win the investment-versus-cost argument at these prices, it never will”.
Below, GroupM’s forecast, by major media.
Television (-2% in 2008 and 2009)
TV commercials will collect a 4-5% bigger audience in 2008 thanks to a mix of bad weather and good programs – and people staying in and saving money, which is less welcome.
With more audience coming in, advertisers confront an old dilemma – take cash out or buy the extra audience, and with it market share. Inevitably, some have already taken cash out.
The UK’s TV trading model is based on share (of an advertiser’s annual TV budget) rather than volume (a predetermined amount of money). Share deals make it easier for advertisers to reduce investment. (The continental model is typically volume-based, which impedes exit).
Internet (+27% this year, +20% next year)
The current ad slowdown is unlikely to affect internet much. Uncertain advertisers are more likely to increase response advertising.
Second, direct-response advertising – the main reason advertisers use the internet – while not actually immune from recession, is at least self-leveling in all economic conditions.
Third, mainstream brand advertisers are spending almost negligible amounts online as it is, and are actively seeking to invest more rather than less, if it can be justified.
National Newspapers (-3% this year, -4% next year)
In common with most other media, budgeting has already gone sub-quarterly – a decided nuisance for business planning but a natural advantage for newspapers, which offer advertisers the shortest lead-time of any medium.
Financial advertising grew 10% in the year to March. This will be tough to encore.
Entertainment’s contemporary 14% rise is another tough call given online competition, but games are taking up some of the slack as they move “from bedroom to living room.”
Strong Q4 retail saved 2007, but retailer nerves are being sorely tested in 2008.
Regional Newspapers (-4% this year, -5% next year)
Like the advertising media in general, investment committed long term is staying in the market, but in the case of regional press this is perhaps 60% of display, and display is only a third of the regional print business.
The other 40% of display is always ad-hoc, and becoming more so as consumers meet rising bills out of static income.
With costs rising and revenues falling, we would expect closures of titles if not whole publishers this year or next.
Outdoor (+5% this year, +4% next year)
Outdoor is coping with unusually short lead times: the usual quarter-by-quarter demand clarity is down to little more than a month, and once in this cycle it is hard to stretch it again.
About the study: This Year Next Year is GroupM’s media and marketing forecasting series drawn from WPP’s worldwide resources in advertising, public relations, market research and specialist communications.