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Ad Forecasts Bullish

Ad spending growth is expected to accelerate as the economy gradually recovers in the U.S. and internationally, according to forecasts from major media agencies.

GroupM sees U.S. ad spending growing 3.7% to $147.7 billion in 2011, following a 1.2% increase in 2010. Spending declined 7.1 in 2009. Worldwide, the agency sees spending growing 5.8% to exceed $500 billion for the first time in 2011.

"We've seen a significant rebound in advertising spending in the U.S over the last six months," said Rino Scanzoni, chief investment officer of GroupM. "Television and on-line media have been the primary beneficiaries of the rebound in spending. In television, the growth is driven by local TV as political advertising-coupled with the resurgence in growth from the retail and auto categories-has risen from the historically depressed levels of 2009."

Scanzoni added that moderately accelerated growth is anticipated in 2011 as corporations with significant cash reserves deploy investment in marketing and advertising to drive top line growth.

MagnaGlobal sees U.S. television revenues rising 1.8% in 2011 to $57.2 billion, with pay TV rising 8.8% and broadcast, without election or Olympic spending, contracting 3.1%. For the years 2011 to 2016, MagnaGlobal sees TV rising at a compounded annual growth rate of 6.5%, with cable gaining 9.3% and broadcast increasing 4.1%.

MagnaGlobal sees total U.S. spending rising 2.4% to $146.5 billion in 2011, following a 6.2% gain in 2010. From 2011 to 2016, the agency forecasts 4.6% growth.

ZenithOptimedia is forecasting that expenditures on major media in the U.S. will be up 2.4% in 2011, up 2.8% in 2012 and 3.3% in 2013. In 2010, U.S. ad spending is finishing up 2.2%, the agency says.

Worldwide, MagnaGlobal forecasts that media revenues will grow 5.4% to $412 billion. In its forecast just six months ago, MagnaGlobal foresaw a 4.2% increase. The gains follow growth of 6.9% in 2010.

The ad-supported media economy is firmly on a path towards sustained gains in most countries around the world, with Argentina, India and China leading the way, more than offsetting declines from the struggling advertising sectors in Greece, Croatia and Ireland, MagnaGlobal says.

Worldwide, video represents more than 40% of all advertising revenue, or $169 billion, according to MagnaGlobal, which sees video advertising growing 7.5% annually through 2016. Online advertising is growing faster, passing newspapers to become the No. 2 media by 2013. (GroupM also see digital media challenging newspapers for second place.)

GroupM's global forecast calls for a 5.8% increase to $501.7 billion. It figures that spending rose 5.9%.

ZenithOptimedia sees worldwide ad spending growing between 4.6% and 5.2% for the next three years, and recovering to the record level of 2008 in 2012.

Much of the growth is coming developing markets and digital media, according to Steve King, worldwide CEO of ZenithOptimedia. "In fact the importance of the internet is underrepresented in these figures. Advertisers are investing a lot more in owned and earned media, where their activities do not count as ad expenditure in the traditional sense.

ZenithOptimedia is pegging global ad spending growth for 2010 at 4.9% (up from an October forecast of 4.85).

Amid the growing optimism, ZenithOptimedia's report warns that "there are certainly risks to the recovery, notably high debt in the developed world (both private and public), persistent unemployment in the U.S., fears of defaults in the Eurozone, and cuts in government spending. Until advertisers are fully confident that the economic recovery will be sustained, we expect growth to remain below its long-term trend rate of 6%."

Executives from the agencies will be discussing their forecasts Monday morning at the UBS' 38th annual global media and communications conference in New York.