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eMarketer Cuts Forecast for Global Ad Spending Amid Economic Fears

Analysis of information from more than 500 data sets on global ad spending suggests slowdown, though some markets remain at healthy spending levels

NEW YORK (December 28, 2012)—Global ad spending is growing slower than previously expected this year, according to a new forecast by eMarketer. And while the advertising industry is expected to continue growing spending at relatively healthy rates for the next several years, fears in many countries of continued or renewed economic slowdowns have caused advertisers to set spending levels slightly lower.

eMarketer estimates total media ad spending worldwide rose 5.4% this year to just under $519 billion—an uptick in the growth rate since 2011’s increase of 3.6%. Ad spending will continue to climb at a similar pace throughout eMarketer’s forecast period, which extends through 2016. By that year, eMarketer forecasts, worldwide ad spending will top $628 billion.

In May, eMarketer forecast total ad spending worldwide would grow 6.8%—more than a percentage point higher than the revised estimate—to $538 billion this year.

eMarketer is relatively distinct in its methodology for global ad spending. The company forms its forecasts through an analysis of various elements related to ad spending—including macro-level economic conditions, historical trends of the advertising market, estimates from other research firms, investment banks and other forecasters, and consumer media consumption trends—at a country and regional level before building its worldwide model.

In this case, eMarketer analyzed more than 500 data sets from over four dozen companies that track ad spending, looking at more than 29 countries and six major regions worldwide, to form its forecast.

The downward revision comes as a relative consensus among many major media buyers, research firms, and investment banks—whose ad spending estimates are each tracked and evaluated by eMarketer based on their respective methodologies, definitions and historical accuracy—suggests that spending levels in several major global ad markets have come in lower than previously thought.

Taking a bottom-up approach to evaluating the global ad spending market

eMarketer evaluated comparative data from many sources in each major global ad market before creating its figures for the global market. There are several major ad markets, including Brazil, China, Canada, Japan, the United States and the United Kingdom, that help buoy worldwide growth despite declines and flat spending in others.

eMarketer estimates the fastest growth during the forecast period will come from Latin America, where ad spending is up 11% this year to $34.66 billion. By 2016, ad spending in Latin America will reach $51.33 billion. Asia-Pacific, Eastern Europe and the Middle East and Africa will also enjoy higher-than-average growth rates, while growth in North America and Western Europe will be significantly slower. This year, Western Europe has struggled to grow ad spending at all, with several major countries posting spending declines.

In the US, the world’s biggest ad market by far, spending is estimated to be up 4.9% this year to $166 billion. That level of growth will moderate over the next several years, eMarketer predicts, and 2016 spending levels will near $190 billion.

By eMarketer’s analysis, most research firms have predicted slower ad spending growth in the US, though absolute dollar levels vary. While eMarketer’s growth projection is relatively bullish, our forecast of absolute spending levels is comparatively conservative.

The No. 2 country in the world in terms of ad spending is Japan, though it’s set to be replaced by China in 2014. eMarketer estimates spending is up 3% this year, in line with most research firms other than PricewaterhouseCoopers, which predicts significantly higher growth of nearly 10%. Estimates of absolute spending levels fall within about 10% of each other, with eMarketer’s figure of $47.3 billion at the low end of the range.

China, the third-largest ad market in the world, is growing ad spending much more quickly than mature markets like the US or Japan. eMarketer estimates ad spending in the country is up 13% this year, slightly higher than Warc’s November 2012 projection of 11.5% growth. Research firms that predicted significantly higher growth rates tended to make those forecasts earlier in 2012, when overall economic prognostications for China were more favorable. Still, eMarketer predicts double-digit growth rates through the rest of the forecast period in this massive country will help boost Asia-Pacific—and worldwide—growth rates.

The biggest ad spender in Europe, and the fourth-largest in the world, Germany will post near-flat growth of 1.5% this year, with spending reaching $27.7 billion. Some researchers have even forecast a decline in ad spending in Germany, but forecasts made in Q4 of this year expect growth of around 1% or just above. eMarketer expects this sluggish growth to continue in Germany throughout the forecast period.

Ad spending growth in the UK is somewhat better, and closer in line with US rates. eMarketer estimates spending reached $24 billion this year, somewhat higher than other firms’ predictions. ZenithOptimedia, which has the most recent estimate of ad spending in the country and comes in significantly lower than eMarketer, does not include directories spending in its figures.

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Posted on December 28, 2012.