ZenithOptimedia is predicting a “stagnant” Canadian ad market for 2009, as marketers retrench in the midst of the biggest financial crisis in decades.
The latest advertising expenditure forecast from the unit of Publicis Group predicts Canadian ad spending to reach $10.06 billion this year, essentially flat from $10.04 billion in 2008. It forecasts ad spending to reach $10.25 billion in 2010, climbing to $10.5 billion in 2011.
But with ZenithOptimedia projecting global ad spending to plummet 6.9% this year, this is a good news forecast for Canada said agency president Sunni Boot. “Our market is soft, make no mistake about it… but we’ve been saying for the last 10 months—and we’re sticking to it—that flat is the new up,” she said. “I don’t see it turning around until mid-2010. The Olympics will see some growth, but on the other hand… I don’t see it giving us a real boost.”
ZenithOptimedia said it expects advertisers to rationalize their advertising by focusing on their strongest brands, while seeking greater flexibility from media partners regarding potential cancellations.
Not surprisingly, online will remain a key driver of ad growth, with ZenithOptimedia predicting online spending to increase 15% to $1.7 billion this year. “Online will continue to account for most of ad spend growth during the forecast period,” said the forecast, which pegged online to account for 20% of all ad spending by 2011 (it accounted for 15.6% last year).
Search will continue to dominate the online ad space, with local search the dominant segment.
Video is small but the fastest-growing segment, while the forecast predicted more growth for mobile marketing with the introduction of new wireless competitors in the fall. It also predicted that data costs will fall, while the emergence of smart phones will “create a more enjoyable experience than traditional cellphone screens.”
ZenithOptimedia is also predicting a tough year for traditional media, with even formerly resilient categories like radio and outdoor starting to feel the effects of a downturn that has already hammered the newspaper and TV sectors. The forecast predicts the out-of-home sector will experience its first decline since 2002, dropping to $430 million from $435 million in 2008. However, Zenith predicted the out-of-home sector would recover more quickly than other media.
And while noting that radio finished the 2007/08 broadcast year “well ahead” of the market average—growing 3% to $1.6 billion—the report also predicted that radio ad sales will stagnate in 2009 before experiencing what it described as “modest” growth next year. ZenithOptimedia predicted radio ad sales of $1.57 billion in 2009 and $1.61 billion in 2010, but Boot noted that top stations in major markets will continue to thrive. “Radio is a good retail media, and they need to make sales,” said Boot.
The report also predicted continued erosion for daily newspapers, with revenues falling 3.1% to $2.4 billion from $2.5 billion last year. However, mirroring comments made by Canadian newspaper executives, the forecast also noted that Canadian dailies—which accounted for 26% of all Canadian advertising in 2008, second only to TV—are in better shape than their U.S. counterparts, with readership stable and free commuter papers such as Metro thriving.
However, the forecast also noted that newspapers are increasingly losing last-minute bookings to the online sector, and will continue to be adversely affected by fallout from the auto industry’s woes and a “softening” retail environment.
After a decade of growth, consumer magazine advertising dipped 3.8% to $691 million in 2008, and is expected to drop an additional 3.8% to $665 million in 2009 before rebounding next year. The economic downturn has already claimed several high-profile consumer magazines, including Time, Wish, Gardening Life and Canadian Home & Country, the report noted.
While television revenues increased 1.8% to $3.36 billion in 2008, the forecast noted that fourth quarter softness will persist through most of the year as advertisers rein in spending or turn to more affordable and flexible alternatives like online and radio. Total TV advertising is expected to drop 3.3% to $3.24 billion this year.
Zenith projected a 4.5% drop in conventional TV advertising, while the formerly robust specialty sector is also expected to see a “break” in what the agency called its “healthy growth trend.” A fall election could produce a “short-term” lift, while the upcoming Vancouver Olympics will prevent further declines in 2010. However, the forecast predicted long-term spending on conventional television to remain “soft,” and pointed out that media companies like Canwest and CTVglobemedia are struggling with “well-publicized” financial issues.
