Internet proves growth ad-vantage

Ad buyer Zenith upgrades its midyear forecast

LONDON — Soaring advertising expenditure in the world’s emerging markets and the arrival of the Internet as a mainstream media platform are fueling continued growth in global ad revenues, according to the latest forecasts from U.K. ad buyer Zenith Optimedia.

Despite economic uncertainties in many markets, Zenith has upgraded its midyear forecast and now expects global ad spend to grow 5.2% to $406 billion this year. Brazil, Russia, India and China will account for 27% of the increase.

“Although quite a few people are gloomy about advertising expenditure, it is quite a localized phenomenon,” said Jonathan Barnard, knowledge management manager at Zenith. “The worldwide market is actually looking quite healthy.”

However, the worrying news for broadcasters is that TV’s share of ad coin appears to have reached its peak in most mature markets, after many years of growth, and might even be going into reverse in some. According to Zenith, TV’s share of ad revenue is projected to fall from 37.4% in 2004 to 37.1% in 2005, although total spend will rise slightly to nearly $148 billion.

“Broadcasters are going to have to start thinking about other ways of generating revenue,” Barnard said. In particular, he believes subscription revenues, product placement and sponsorship will become increasingly important revenue streams.

The U.S. remains the largest contributor to global ad growth, providing 30% of this year’s expansion, although the market is relatively slow-growing itself. TV ad spend in the country will hit $56 billion in 2005, accounting for 31.9% of total expenditure, but this figure is set to decline to 31% by 2007.

The Internet, meanwhile, supplied 16% of 2005’s ad growth, as its market share rose from 3.7% in 2004 to 4.3% in 2005. In some markets the Web has already overtaken cinema and outdoor advertising, noted Barnard, adding that newspapers are losing out the most to online advertising.

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