Political advertising set to rescue ad growth amidst weak economy

 New York, January 24^th, 2012 – MAGNAGLOBAL, the strategic global media unit of IPG’s Mediabrands, today released an updated US Media Owners Advertising Revenue Forecast.

After the deep recession of 2008-2009 and the recovery of 2010, stabilization was the headline in 2011. Advertising markets, however, saw a gradual slowdown in growth, which we expect will continue into 2012. The quadrennial boost of 2012 (political advertising and, to a lesser extent, the Summer Olympic broadcasts) will nevertheless help generate a year-on-year revenue growth of 3.7% in 2012.

Following the economic trends, advertising growth slowed down gradually through 2011. Media owners’ advertising revenue grew 2.3% in Q3 and 1.1% in Q4, compared to 4.3% in the first half. Overall MAGNAGLOBAL estimates that core media revenues (excluding direct marketing categories) grew by 2.9% in 2011 to $147.4 billion. Despite the combined growth of 2010 and 2011, the US advertising market is still 13% smaller than what it was in 2007 ($168.7 billion).

In 2012, a weak economic environment and high unemployment (forecast to remain above 8%) will result in cautious consumption growth and marketing expenditure. However, as in every quadrennial year, the advertising market will benefit from the cyclical incremental advertising expenditure generated by the elections (Presidential, Congressional and Gubernatorial) and the Summer Olympics. Due to a relaxation of campaign finance rules by the Supreme Court in 2010, super PACs are now allowed to raise and spend almost unlimited amounts to run political or “issue” advertising.

“These new rules, combined with the intensity of the political battle (evidenced already by the Republican Primaries) and the high number of Swing States, are likely to generate the highest ever political spending in 2012: $2.5 billion just for television” said Vincent Letang, EVP, Head of Global Forecasting. “The Olympic Games broadcast will generate an incremental $630 million, bringing the total Political and Olympic (P&O) impact to a record $3.1 billion for television alone”.

Without P&O revenues, core media advertising revenues would grow by 2.0% in 2012, to $149.8 billion – a slowdown compared to 2011’s like-for-like growth of 4.5%. But with P&O adding an extra 1.7 growth point, advertising revenues will reach $152.9 billion, a 3.7% year-on-year growth on 2011.

In terms of performance by media category, broadcast television will benefit the most from the P&O bonanza. The category is expected to grow by 8.5%, while total television will grow by 6.8% to $62.4 billion. Internet media revenue grew by 21.4% in 2011 to reach 18.2% in market share. We expect revenue growth to slow down in 2012, due to maturity, but internet will still grow double-digit (+10.9%), driven by paid search (+12.6%), online video (+22.4%), mobile (+44.2%). Outdoor media will grow by 4.0%. All other core media categories will struggle in 2012, due to weak underlying growth and the competition of television and digital media for attention and advertising dollars: newspapers (-6.0%), magazines (-5.2%), radio (-0.8%).

Traditional, offline direct marketing will continue to decline in 2012, under the competition of online and mobile alternatives. Directories revenues will decrease by 19.1% and Direct Mail by -1.9%. If adding traditional direct marketing to core media, the wider advertising market will reach $177.7 billion in 2012 (+2.3% like-for-like) in 2012.

About MAGNAGLOBAL Advertising Forecasts:

For more than 40 years, MAGNAGLOBAL forecasts have been the industry’s leading source for measuring and forecasting advertising revenues. MAGNAGLOBAL projects media owners’ advertising revenues in the US and around the world through financial analyses of media companies’ public filings, government reports, trade association data and local market expertise. MAGNAGLOBAL’s new methodology was introduced to the industry in 2009 and has redefined measurement for the advertising-supported media economy, delivering unparalleled authority and accuracy. Our US Advertising Revenue Forecast model includes detailed data for more than 40 categories of media on a quarterly basis from 1990 to 2012 and on an annual basis from 1980 to 2016, updated quarterly.  Please email karina.gyadukyan@magnaglobal.com for further details.

About MAGNAGLOBAL:

MAGNAGLOBAL is the strategic global media unit of Interpublic Group, driving forecasts, insights and negotiation strategy across all media channels. The MAGNAGLOBAL Intelligence Unit delivers the industry’s most accurate and authoritative forecast of media value. The MAGNAGLOBAL Investment Unit harnesses $30 billion of Mediabrands global media billings. Follow us on Twitter for updates @MAGNAGLOBAL.

PRESS CONTACT:

Belle Lenz

belle.lenz@mbww.com

212-883-4791

BRICs and Sports Will Help Global Advertising Revenues to Grow In 2012

 New York, December 5, 2011 – MAGNAGLOBAL, a division of IPG Mediabrands, released updated Global Advertising Forecasts, showing media owners’ revenue growth for 2011 and 2012 to be slower than previously projected, but still resilient.

Key Findings:

-2011 global growth is revised down to +4.7% (downgraded by -0.5%), totaling $427 billion.

-2012 global growth is revised to +5.0% (downgraded by -1.5%), totaling $449 billion.

-Quadrennial events, combined with the scale and dynamism of the BRIC countries will help sustain global growth despite worsening economic outlook. They contribute to 45% of the global growth in 2011.

-Internet will become the second biggest media category in 2011, reaching a 20% global market share in 2012.

-China will become the second largest advertising market in 2012, outgrowing Japan.

2011: The Slowdown

In 2011, media suppliers around the world will see their advertising revenues grow by +4.7% to total $427 billion (constant USD 2010 basis). That estimate is down slightly (-0.5%) from our +5.2% forecast published in June 2011, due to the softening of some markets in the second half of the year. Our media suppliers advertising revenue projection includes: television (pay and free), Internet (search, display, video, mobile), newspapers, magazines, radio, cinema and out-of-home (traditional and digital). It excludes direct marketing categories such as direct mail or traditional “yellow page” directories. We monitor media suppliers’ revenues in 63 markets (including all major markets), representing more than 95% of the world’s economy.

The geography of growth. More than ever, emerging economies drove global advertising revenue growth in 2011, posting an average +15.0% growth during the year. Among these developing economies, Latin America posted the strongest growth rates, averaging +13.2%, closely followed by Central and Eastern Europe (+13.0%). Developed markets, meanwhile, grew at much slower rates, such as +1.6% in Western Europe and +3.1% in North America, due to a number of factors including: a strong 2010 comparison (revenues were up +8.2% compared with 2009); macro-economic slow-down and persistent financial uncertainties; the absence of major sporting events or U.S. elections; and natural disasters in Asia. Among individual countries, the strongest growth rates came from: Argentina (+37.9% in the context of a strong inflationary economic growth), China (+22.5%), Kazakhstan (+25.6%), Russia (+20.4%), India (+15%) and Brazil (+10.2%). Eleven countries (out of the 63 analyzed by MAGNAGLOBAL) suffered a decline in advertising revenues, including countries in Southern Europe hit by protracted economic turmoil and political instability (Greece: -19.3%; Portugal: -6.9%; Spain: -6.3%; Italy: -2.5%); emerging markets temporarily destabilized by the Arab Spring (Egypt -21%); and Asian countries hit by natural disasters (Japan -2.0%, Thailand: -2.0%). Many of the large markets of Western Europe and North America wound up in the middle, typically showing low single-digit growth (UK: +1.8%; Germany: +3.0%; U.S.: +2.9%).

Among media categories, television, an unexpected winner in 2010 (+12.7%), continued to show strength in 2011, despite the absence of cyclical sporting events or elections in the U.S. Broadcasters’ advertising revenues grew +4.8% to $175 billion, in 2011, maintaining TV’s leadership with a 41.0% market share globally. Strong audience levels and audience measurement improvements – such as the integration of time-shifted DVR viewing into ratings for the first time (e.g. France) – made the medium attractive. Out-of-home (OOH) media fared even better. Including cinema, OOH grew +6.4% globally, driven by the incremental revenues generated through digital billboards (+19.9%), which have rolled out in various parts of continental Europe and Asia. Other traditional media categories, however, had a tougher year. Radio grew only +2.2%; newspapers’ revenues were down -2.4% and magazines declined -0.9%. Declining circulation, shrinking readership, Internet competition and short term media buying patterns (which penalizes monthly magazines), all contributed to print’s decline in developed markets. Things are different in emerging markets, however, where literacy is still increasing and broadband access is still relatively low. In those markets, magazines are growing along with the middle class, and there is enough advertising demand for every media beyond TV to benefit. Overall, print advertising revenues are up by high single digit percentage points in emerging markets.

The big winner of 2011, however, was Internet media. Total Internet advertising revenues increased +16.9% to $78.5 billion. While Display subcategories increased +15%, Paid Search reaped the benefits of usage growth and algorithm improvements to reclaim its position as the largest digital revenue driver (+19%). Within Display, online video continues to show impressive growth (+58.5%), reaching $4.7 billion in revenues. Pre- and mid-rolls in online videos now generate 6% of total Internet advertising revenues and one percent (1.1%) of global advertising revenues. Even more than online video sharing specialists, TV broadcasters offering free, ad-funded online “catch-up” of long-form, full-length episodes are driving category growth.

Overall, coming after a strong 2010 and in a poor macro-economic context, media suppliers displayed a resilient performance in 2011. But the global market is barely back to where it was in 2007 ($423 billion in constant USD), and still smaller in the case of Western Europe (2007: $112 billion, 2011: $106 billion). This reflects that media costs that are still low from a historical perspective.

2012: The BRIC Engine

For 2012, we now forecast media owners’ advertising revenues to grow by +5.0% to $449 billion. This is -1.5% below our previous prediction published in June 2011 (+6.5%).

This downward revision is due to deteriorating macro-economic perspectives. Our forecast model is based on current, official economic forecasts that are generally predicting weaker – but still positive – growth next year. However, the uncertainty remains high, especially in Europe. In September, the IMF reduced its global output forecast (real GDP growth) from +4.5% to +4.0%. Although that forecast suggests the world economy would still grow, it’s an awkward average between emerging economies that are growing at healthy rates and developed economies that are still sputtering (average +1.9%, US: +1.8%). In late November, OECD revised its own global output forecast to +3.4% (including +1.6% for OECD countries and only +0.2% for the Euro area) warning that 4Q11 and 1Q12 could tip negative in most European countries, in line with 3Q11 slowdown. Greece, Italy and Portugal, in particular, are now expected to suffer full-year recessions in 2012. Other economic indicators (industrial production, personal consumption and business confidence) have been similarly downgraded in recent months and some independent forecasters have expressed increasingly gloomier views.

Despite the worsening economic outlook, we are still projecting a positive growth rate based on a few factors:

-First, the well-known “quadrennial” cyclical driver is back, and we believe it will be stronger than ever. The incremental ad spend generated by major sporting events (London Summer Olympics, Poland/Ukraine European Soccer Championship) and the U.S. Presidential Elections will bring an additional +1% to +2% on top of organic revenue growth across markets. In the U.S., Political and Olympic (P&O) money will account for three billion dollars of incremental ad spend, mostly on television ($2.4 billion related to the Elections, $600 million generated by Olympic Broadcasts). Meanwhile, major sporting events will help in European markets that are otherwise hit by economic stagnation, such as the UK (which is hosting the Olympics, although the games are broadcast on the ad-free BCC) and Italy (where the Games and Soccer tournament will mostly be broadcast by RAI, one of the few European public television groups still allowed to carry a full, all-day advertising load).

-Second, big emerging countries will increase their share of global economic and advertising influence. At the end of 2012, emerging markets will represent 24% of global advertising revenues (compared with 7% in 1999) and the four BRIC countries alone will account for 14% (compared with 3% in 1999). Adding scale to dynamism, the BRIC markets have the capacity to offset part or all of the Western weakness. The four BRIC markets equated to only 10% of Western Europe’s advertising revenues in 1999. That ratio will grow to 59% by the end of 2012, and by 2016 the BRIC countries will almost match the size of Western Europe (94%). The BRIC countries contributed to 45% of the global market growth in 2011 ($9 billion out of $19 billion). With a growing proportion of the BRIC countries’ population adopting Western-style media consumption patterns, and with Western and local brands competing for top-of-mind among the emerging middle class, media demand is in excess of supply and inflation reigns. BRIC countries lag behind the global average advertising spend per capita ($80) – Russia: $70, Brazil: $60; China: $21, and India: $4. With such structural factors, we expect advertising spending and revenues in those markets to keep growing faster than the general economy, supporting global revenues in their wake.

-Thirdly, some lessons learned in 2009 may help avoid a replay. Some major advertisers, e.g. in FMCG, have since admitted that they may have over-reacted back then by cutting advertising expenditures too hard and too quickly, harming their brands. We believe that this time, even if sales forecasts are being revised downwards, marketers will remember that market shares are subject to losses or gains, including – and perhaps even more so – during a recession, as consumers reconsider their choices. In addition, the Western advertising market is still smaller than five years ago, which means prices and net costs per thousand – despite some inflation in 2010-2011 – are still competitive and attractive by long term standards. Therefore, brands in various sectors have both the incentive and capacity to invest smartly to boost or defend their market shares.

In 2012, advertising revenues will grow by +12.4% in emerging economies, with Latin America still leading the charge (+13.0%) followed by Central and Eastern Europe (slowing down at +7.7%). Asia Pacific will re-accelerate to +8.3% due to the recovery of Japan and the continued growth of China. Western Europe will slow down at +1.1%. The sports driver will not be enough to offset recession in many European countries: Greece, Portugal, Spain, Ireland will decrease again (between -2% and -6%); Italy and France will be flat at best. UK and Germany will grow below +2%.

The biggest growth rates of 2012 will come from Argentina (+26.4%), Ukraine (+21.0%), Indonesia (+16.0%), China (+16.1%), Brazil (+12.0%), India (+13.5%) and Russia (+9.6%).

In terms of media market share, Internet will grow by 11.2% and outrank newspapers to become the second biggest media category globally, accounting for nearly 20% of global advertising dollars (19.5% at $87.4 billion). The category already stands at 23% in both North America and Western Europe (where it even takes the #1 spot in a few markets, such as the UK). Television will receive the bulk of the “quadrennial” bonanza and will benefit from the typical concentration of advertisers into leading media at the expense of secondary media during harsh times. TV will grow by +6.7% globally to $187.1 billion. Newspaper and magazine revenues will shrink by an average -1.0% and -1.3% respectively, with much deeper drops in Western markets, where circulation losses of 2011 will be reflected in 2012 ad pricing. Radio will grow by +1.6% to $30.4 billion. OOH will also benefit from the “quadrennial” events and the roll-out of new digital (+6.3% to $28.3 billion) platforms. In the UK, the innovative upfront auction process conducted last summer to allocate the most premium London inventory during the Games did not quite meet the high expectations, but the industry is still expected to grow healthily next year.

China Takes the #2 Spot

China’s advertising market is expected to continue outperforming its already impressive economic growth in 2012, with a +16.1% growth. At $33.3 billion, China will become the second biggest advertising market, ahead of Japan, now third at $32.1 billion. Germany remains the fourth biggest market, some distance behind ($25 billion). Other top 10 markets are – in order – UK, France, Brazil, Canada, Australia and Italy. Russia will enter the top 10 in 2013, at the expense of Italy.

Please see the Press Release for Charts and additional information.

MAGNAGLOBAL Global Advertising Forecast - December 2011 (62) 

PRESS CONTACT:

alisa.monnier@mediabrandsww.com

347.522.0563

TV and Online to Remain Resilient Amidst 2012 Slowdown

New York, October 11^th, 2011 – MAGNAGLOBAL, a division of IPG Mediabrands (NYSE: IPG), today released its updated US Media Owners Advertising Revenue Forecast.

The 2011 forecast remains unchanged at 1.6% growth, including the impact of political and Olympics (P&O) advertising, and we still expect media suppliers to generate $173.5 billion of advertising revenues in 2011.  Due to persistent weakness in the US economy, however, we have revised our 2012 growth forecast down from 4.8% to 2.9%, including P&O.  A slowdown in real personal consumption expenditures, manufacturing activity, and ongoing problems in the labor and housing markets all contribute to our revised outlook. Our estimates are further impacted by continued disinflation. Our forecasts encompass core media categories including Television, Internet, Print, Radio and Outdoor, as well as direct marketing categories (Direct Mail, Directories). Excluding direct marketing components, the revenue growth of core media categories is estimated at 2.9% in 2011 and 4.3% in 2012.

Under the current expectations of a slow-but-positive economic recovery in 2012, media suppliers’ advertising revenues will continue to recover from the severe recession of 2008-2009. MAGNAGLOBAL expects revenues to reach $178.5 billion in 2012, which is still significantly less than the pre-recession level of 2007 ($206.1 billion).

National Mass Media will continue to gain share due to strength in national Online Display, Online Video, Mobile and National Cable Network advertising. Across our three media segments, TV will be the fastest growing medium after Online in 2012, with advertising revenues increasing 7.1% compared with Online’s 11.6%. Television will benefit from the “quadrennial bonanza.” We believe the 2012 Elections and the Summer Olympics will generate incremental revenue of $3.1 billion for television: $2.5 billion in political advertising (the highest spending ever, mostly on local broadcast television) and $633 million around the London Olympics (up 5.5% compared with Beijing 2008, and primarily fuelling National Broadcast TV revenues).

Direct Media is exhibiting an increasing discrepancy between traditional activities (Directories and Direct Mail) and digital (Internet Yellow Pages, Paid Search, Lead Generation). Traditional direct media remains significant ($26.2 billion in 2011), but it is increasingly challenged by digital alternatives. Digital direct media, on the other hand, continues to outperform. Paid Search growth has accelerated this year to 21.7%, and is expected to maintain double-digit growth in 2012 (13.0%). Recent algorithm improvements have helped accelerate cost-per-click trends and have led brands to rely more heavily on search engine marketing and search engine optimization while eschewing low-quality sites. For 2011, we now expect $31.1 billion in total online advertising, up 19.5% vs. 2010.

Direct Mail is a sector worth paying close attention to if the economy continues to deteriorate and postal regulation is reviewed. If Saturday delivery is ultimately eliminated ­– as has been proposed in the U.S. and is the norm in many European markets – newspapers and advertisers may need to plan ahead, and some advertisers may choose to accelerate shifting dollars into digital.

In Local Mass Media (local Radio, local TV, local Newspapers and Outdoor media), the signs of the slowdown we identified in our last update point to continued declines through the second half of 2011 and into 2012. We now expect this segment to decline -1.1% in 2011 and -0.4% in 2012, driven primarily by weakness in Newspapers (-5.5%), while Radio will be flat (-0.4%), and Outdoor should grow 4.2% in 2011 and 4.5% in 2012.

PRESS CONTACT:

alisa.monnier@mediabrandsww.com

347.522.0563

This quarter, we also introduce a proprietary model with new estimates for Over-the-Top households. Our model predicts that, by 2016, 9 million households will exclusively rely on Over-the-Top services for video consumption, without a subscription to traditional multichannel PayTV services.

Our revised year-end 2016 forecast for DVR subscriber households now stands at 57.5 million (48.7% of TV households), revised down from 63.1 million in our July 2011 forecast and compared to 41.2 million (35.5% of TV households) as of the end of the second quarter of 2011.  The revisions were mainly based on evidence suggesting some maturation in the DVR market and economic pressure causing subscribers to contain their PayTV costs. The total number of DVR households was also negatively impacted by downward revisions to new household formation growth.

By 2016, we expect that Video On Demand – which we define as including Over-the-Top services – will reach 65.7 million households (approximately 55.7% of TV households).  This compares with 54.8 million VOD households (46.9% of total TV households) at the end of the second quarter. As of the end of the second quarter of 2011, approximately 85.7 million homes – 72.4% of the total – were online; 91.0% of these homes accessed the internet using broadband services. Our long-term internet access forecasts call for 97.1 million households to be online in 2016, of which 95.7 million will have broadband services.

For a full version of the report and model please contact us.

On Demand Quarterly July 2011

Following an 8.0% rebound in 2010, we forecast that media suppliers around the world will grow their advertising revenues during 2011 by +5.2% to total USD$428.4 billion on a constant currency basis, revised downward from our previously published expectations of +5.6%.

Long-term growth rates, however, are upgraded, reflecting stronger expectations for emerging markets through 2016.  Our compounded annual growth rate (CAGR) for the global industry is +6.8% over the next five years, compared to previous expectations of +6.3% in late 2010.

Video bounced back strongly in 2010 and continues to be the dominant advertising medium, claiming over 40% of the global advertising market.  Traditional television advertising is expected to grow 8.3% on average through 2016, gaining more advertising market share in North America, the world’s largest TV market, than in any other region.  Concurrently, we expect online advertising to overtake newspapers as the second-largest advertising medium by 2012, reaching USD$129 billion in 2016.  Technological advancements in ad serving, targeting and measurement, improvements in search quality, and rapid growth of social media will all help the medium attract more investment.

By contrast, print media will see renewed weakness in 2011.  We now expect a slight decline in revenue for the sector compared to our previous expectation of positive growth of less than 1%.  Over the next five years, however, newspapers and magazines collectively should grow 1.6% on average, an upward revision from our previous estimate of 1.2%.  In many emerging countries, particularly in those where literacy rates are rising and the threat of online substitutes remains limited, newspapers remain a popular medium to distribute content to consumers.  Our radio estimates remain largely unchanged, but out-of-home should continue to see relatively more favorable trends, which will help make it the second fastest growing medium after online over the next five years.

In dynamic USD terms – important to a media owner or advertiser who does not hedge currency exposure – global advertising will rise by +9.2% during 2011, and continue to grow by a CAGR of +8.1% through 2016.  Our currency estimates assume a depreciating US dollar against most other currencies over the next five years.

PRESS CONTACT:

Jonathan.Nierman@mediabrandsww.com

212.883.4736

We now expect media suppliers to generate $173.1 billion dollars of advertising revenues in 2011. In light of recent economic reports, we are revising our forecast slightly downward from +3.1% to +2.9%, excluding the impact of political and Olympic advertising.  While we see the disruption from the earthquake in Japan and high gas prices as temporary, the economy still suffers from a depressed housing market, sluggish employment conditions, and fiscal retrenchment at all levels of government.  Our previous forecasts had already conservatively assumed a slowdown in the second half of 2011.

Online advertising growth exceeded our expectations in the first quarter as the share attributed to national media (primarily reflecting Digital Display and Online Video) was significantly higher than recent trends would have predicted.  Though some premium display publishers may have seen a slowdown stemming from the broader economy, National Online advertising overall benefited significantly from strong momentum in online video and social media as large national advertisers begin to invest more in building brand awareness online.

Many of these advertisers are also investing more in Paid Search, allowing Direct Online Media to outperform our expectations.  We believe recent improvements made in search quality have benefited the sector and many more monetization opportunities exist in social media.  Online advertising, and Paid Search in particular, was likely helped by continued growth in e-commerce, which accelerated during the first quarter by 17.5% compared to the prior year period.  For 2011, we now expect $30.1 billion in online advertising, up by 15.6% from 2010 levels.

A more pronounced shift to National Mass Media can also be seen in the strength of Network TV and Cable advertising.  In total, we expect National TV to grow 7.9% in 2011, up from our previous estimate of 6.5%. Despite upward revisions to National Mass Media, signs of a slowdown are concentrated in Local Mass Media, driven by weakness in Newspapers, Radio and Outdoor advertising.  Direct Media (which incorporates Internet Yellow Pages, Paid Search, Lead Generation, Directories, and Direct Mail) has been particularly impacted by sharper declines in Directories and a slowdown in Direct Mail.

PRESS CONTACT:

Jonathan.Nierman@mediabrandsww.com

212.883.4736