Outlook for Advertising Expenditure

1

• Outlook for Advertising Expenditure
• Adam Smith
• head of knowledge management
• The Zenith Optimedia Group
• 21 November 2002

2
How big?

• Traditional media ? 300bn
• Everything else ? 400bn
• Newspapers ? 100bn

3
Share of traditional media buying

• Publicis Groupe ? 11
• Interpublic ? 11
• WPP ? 10
• Omnicom ? 7
• Aegis ? 5

4
Worldwide economic growth at current prices
1988-2004
Year on Year Growth
Source IFS/HSBC
5
...vs. advertising growth
Year on Year Growth
Source IFS/HSBC/ Zenith Optimedia
6
newspapers vs all advertising
Year on Year Growth
Source IFS/HSBC/ Zenith Optimedia
7
...vs. newspaper share of advertising
Source IFS/HSBC/ Zenith Optimedia
8
advertising and GDP again...
Year on Year Growth
Source IFS/HSBC/ Zenith Optimedia
9
Real growth in US consumer expenditure and total
US advertising expenditure
Source Zenith Optimedia
10
Real growth in US corporate profits and total US
advertising expenditure
Source Zenith Optimedia
11
Ad downturns compared

• 1990 9 markets down (constant prices)
• 1991 10 more markets down
• 1990 1991 4.4 real contraction
• 2001 23 markets down
• 2001 6.4 real contraction in one year
• 2002 1.4 contraction forecast

12
Ad recoveries compared last time(constant
prices, big seven markets)
Source Zenith Optimedia
13
Ad recoveries compared this time (constant
prices, big seven markets)
Source Zenith Optimedia
14
GDP growth at constant prices 2000 - 2003
Year on Year Growth
Source HSBC Q4 2002
15
Advertising as a of GDP 1981-2004
North America

World
Europe
Asia-Pacific
Source Zenith Optimedia
16
World economy

• Global recovery less resilient than expected in
  1H
• Capital allocation defensive
• Demand weakening
• Valuations suggest slower or riskier growth ahead
• Threats war, consumer debt albatross

17
Global advertising - major media
Year-on-year change, constant prices

• 2001 2002 2003 2004
• N. America -8.6 -1.1 -0.5 2.6
• Europe -5.6 -3.2 0.7 2.7
• Asia/Pacific -1.8 1.3 3.8 4.1
• Global Major Media
• USm (nominal) 311,944 312,055 322,135 338,880
• change (real) -6.4 -1.1 1.3 3.0
• Major media are TV, Print, Radio, Cinema, Outdoor

Source Zenith Optimedia
18
2002 v 2001 at constant prices
Ad expenditure forecasts by region

Source Zenith Media
19
2003 v 2002 at constant prices
Ad expenditure forecasts by region

Source Zenith Media
20
2004 v 2003 at constant prices
Ad expenditure forecasts by region

Source Zenith Media
21
2002 forecast worldwide advertising expenditure
by medium (current prices)

Source Zenith Optimedia
22
2003 forecast worldwide advertising expenditure
by medium (current prices)

Source Zenith Optimedia
23
USA summary

• USA 43 of world adspend and 75 of ad recession
  in 2001
• Numbers have stopped tumbling
• Falloff peaked in 2001 (-9 actual)
• 2002 cash spend at par with 2001
• Quadrennial stimulus
• Isolated tightness but no trend

24
Europe summary

• 24 of global adspend 15 of 2001 contraction
• Ad recession only 6 constant in 2001 vs US 9
• No material growth until 2004
• First TV recession ever but pricing fluid TV
  will catalyse recovery

25
Europe advertising expenditure forecasts
2002 v 2001 at constant prices

Source Zenith Optimedia
26
Europe advertising expenditure forecasts
2003 v 2002 at constant prices

Source Zenith Optimedia
27
Europe advertising expenditure forecasts
2004 v 2003 at constant prices

Source Zenith Optimedia
28
Asia Pacific summary

• Constant 2 contraction in 2001 compares to 7
  contraction in 1998
• Japan commands 55 of regional adspend in 2002 vs
  81 in 1991
• US-dependent trading economies hardest hit
  Spore, Taiwan, South Korea
• India and China 11 of regional adspend in 2001,
  forecast 14 in 2004
• Asia ex Japan contracts real 2.4 in 2001, to
  grow 7.0 in 2002

29
Asia Pacific advertising expenditure forecasts
2002 v 2001 at constant prices

Source Zenith Optimedia
30
Asia Pacific advertising expenditure forecasts
2003 v 2002 at constant prices

Source Zenith Optimedia
31
Asia Pacific advertising expenditure forecasts
2004 v 2003 at constant prices

Source Zenith Optimedia
32
Global advertising - major media
Year-on-year change, current prices

• 2001 2002
  2003 2004
• N. America -6.0 0.4 2.2 4.6
• Europe -3.2 -1.1 2.7 4.8
• Asia/Pacific -1.2 1.4 4.0 4.5
• Latin America -0.5 -6.9 8.2 10.2
• Rest of World 4.1 8.4 9.4 11.9
• Global Major Media
• US Million 311,944 312,055 322,135 338,880
• Change -3.8 -0.0 3.2 5.2
• TV, Print, Radio, Cinema, Outdoor

Source Zenith Optimedia