ZenithOptimedia has made a slight downward revision to its latest global ad spend forecast, predicting worldwide growth of 4.2% to US$531 billion this year – a slight 0.2% decline from its March forecast.
The price of oil is having “divergent” effects on Canada and the U.S., and even within Canada itself
The company attributed the downward revision to low prices for oil and other export commodities in Latin America, combined with the overall weakness of the Brazilian economy (Brazil is the world’s sixth largest ad market, with a 2014 spend of US$14.2 billion).
The internet remains the world’s fastest growing ad medium by “some distance” according to Zenith, which predicts annual growth of 15% between 2014 and 2017. Cinema is the fastest growing traditional medium, at 4% a year.
Canada is expected to maintain its position as the world’s 10th largest ad market through the remainder of the forecast period, with a projected ad spend of US$10.9 billion in 2017.
In its analysis of the Canadian market, however, Zenith said that the price of oil is having “divergent” effects on Canada and the U.S., and even within Canada itself. Despite an increased volume of Canadian oil exports, the report noted that their value is down “considerably,” leading to cutbacks in business investment and employment in the energy sector.
In addition, the weak Canadian dollar is inhibiting spending by both consumers and businesses.
The report said that the Canadian ad market was softer than expected in 2014, leading Zenith to shave $70 million off its 2015 growth projections to US$10.4 billion.
The report is calling for ad growth of just 0.6% this year, with internet gains being offset by greater erosion in daily newspapers and a softer TV market.
Video and mobile will fuel a 10% increase in digital ad revenues, to US$3.95 billion. With display, search and video migrating with consumers to mobile, that platform is expected to see a 40% increase this year.
After gains of 5.6% in 2013 and 5.5% in the first half of 2014, out-of-home advertising was hit by what Zenith described as a “very soft” market in the back half of the year, reducing year-over-year growth to just 1.4%. However, Zenith said that this year is off to a “much stronger start,” and predicts spending to increase 7.6% to US$507 million.
Zenith said that reports of slow sales in both conventional and cable TV persist, prompting a further reduction for the current broadcast year ending in August by 5.5%, down from 4.5% in the March report. The estimate takes into account increased advertiser demand created by the upcoming Pan Am Games and political advertising already hitting the air in advance of the upcoming federal election.
Advertiser investment in printed dailies was down 17.1% in 2014, while Zenith notes that online advertising revenue has failed to gain any traction in the past two years and that circulation revenue is eroding. It is calling for newspaper spending to fall to $1.2 billion this year, a staggering drop from $2.6 billion just a decade ago.
The company said it hopes to see new readers attracted to online content as the Toronto Star joins La Presse in abandoning its paywall, but noted that competition among online news sources is fierce.
Advertiser investment in print magazines fell 15.5% to $483 million last year, with Zenith calling for further reductions of 10% per year through the forecast period. Total circulation was down 6.9% in the last six months of 2014 according to Alliance for Audited Media (AAM) data, following a 4.8% decline in the first half. Digital copies comprised 6.7% of total circulation in AAM’s latest report, up from 3% in the previous six months.
Zenith said that softness in the fall ad market is reflected in its call for a 1.2% year-over-year decline for radio for the broadcast year ending in August, to $1.6 billion.