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.
MagnaGlobal, the strategic global media unit of IPG’s Mediabrands, today released an updated US Media Owners Advertising Revenue Forecast that says that despite slower ad markets at the end of last year that are carrying over into 2012, there’s good news ahead.
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,” the survey says. 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, the study says — 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.