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Why marketing services grew and grew

Advertising and Media Investment Management – which historically has concentrated on areas such as television, radio, newspapers, magazines, outdoor and cinema – has thrived in recent times, but its overall share has declined. In its place, supposedly less sophisticated, less global and less-developed marketing services have gained as a proportion of our total business. These areas are Consumer Insight, Public Relations & Public Affairs, Branding & Identity, Healthcare and Specialist Communications – particularly direct, interactive and internet communications.

Marketing services have grown more quickly for two reasons. First, network television pricing has risen faster than inflation in past years, to the disquiet of big advertisers. Procter & Gamble, the world’s biggest advertiser, Unilever, Coca-Cola and American Express have all registered voluble protests in recent times. They are sick and tired of paying more for less and hence their laser-like focus on value in the recession and continuing into the recovery.

Growth of media in major markets 2006-2011 %

Television 2006 2007 2008 2009 2010f 2011f
North America 7.7 -2.2 1.3 -6.1 4.8 2.7
Latin America 13.3 11.0 9.6 6.6 14.4 10.9
Western Europe 2.6 4.4 -3.1 -10.8 7.1 3.1
Emerging Europe 25.2 21.6 13.1 -16.7 13.8 11.4
Asia Pacific (all) 8.5 6.4 5.2 -0.3 10.9 9.8
North Asia1 22.1 13.3 13.8 6.5 10.6 9.3
Asean2 13.6 8.0 9.8 10.8 27.2 19.7
Middle East & Africa 14.1 22.5 24.3 11.9 21.6 18.3
World 8.0 4.2 3.4 -4.1 9.1 7.0
Radio 2006 2007 2008 2009 2010f 2011f
North America 1.7 -3.2 -9.8 -6.3 -3.8 0.5
Latin America 5.1 11.0 12.7 9.1 8.9 8.9
Western Europe 1.9 3.9 -1.3 -8.7 0.6 1.2
Central & Eastern Europe 34.4 24.3 11.1 -23.9 -1.2 5.8
Asia Pacific (all) 15.4 5.6 5.2 -0.8 8.6 3.3
North Asia1 n/a 26.1 23.1 8.2 19.0 7.4
Asean2 3.3 1.8 9.7 11.9 12.8 5.7
Middle East & Africa 13.9 7.0 21.8 0.1 10.1 8.9
World 5.4 2.1 -1.8 -5.1 1.6 2.6
Newspapers 2006 2007 2008 2009 2010f 2011f
North America 2.5 -4.7 -9.9 -17.9 -6.9 -1.6
Latin America 7.3 14.3 3.7 1.2 13.6 8.0
Western Europe 2.8 3.7 -5.6 -15.0 -1.0 -0.8
Central & Eastern Europe 15.6 10.5 6.6 -25.0 5.2 5.4
Asia Pacific (all) -4.2 2.7 -1.9 -7.7 7.7 4.8
North Asia1 -13.1 7.1 5.9 1.6 13.2 4.7
ASEAN2 2.1 10.7 10.7 5.4 13.5 9.2
Middle East & Africa 11.1 18.1 12.1 -3.7 -1.1 1.6
World 1.3 1.8 -4.5 -12.8 0.8 1.5
Magazines 2006 2007 2008 2009 2010f 2011f
North America 2.7 3.4 -6.8 -14.8 -3.7 1.9
Latin America 12.1 4.2 17.9 -17.4 5.8 3.0
Western Europe 2.8 1.1 -5.7 -21.8 -1.7 -1.6
Central & Eastern Europe 12.7 11.9 6.9 -35.8 -2.9 8.7
Asia Pacific (all) 2.5 1.1 -3.3 -16.2 1.4 -1.9
North Asia1 18.3 17.0 15.1 -1.8 15.6 4.0
ASEAN2 8.7 -1.7 6.0 0.3 4.3 3.9
Middle East & Africa 14.9 14.7 9.7 -5.8 3.4 4.9
World 3.3 2.8 -4.7 -17.9 -2.0 0.7
Outdoor 2006 2007 2008 2009 2010f 2011f
North America 8.5 6.0 -5.9 -4.7 1.5 4.1
Latin America 6.9 0.6 6.6 1.2 11.7 8.6
Western Europe 4.7 3.3 -2.8 -8.7 1.8 1.8
Central & Eastern Europe 34.6 17.7 15.1 -32.1 8.3 8.9
Asia Pacific (all) 14.5 -2.2 6.9 -9.1 4.0 2.6
North Asia1 40.2 -16.6 36.0 -1.9 13.8 8.7
ASEAN2 21.2 12.5 11.7 7.9 6.8 10.7
Middle East & Africa 20.6 68.2 5.0 -5.7 -9.4 -2.7
World 11.7 2.9 2.9 -10.0 3.3 3.2
Internet 2006 2007 2008 2009 2010f 2011f
North America 35.7 26.3 11.6 11.1 10.9 13.0
Latin America 47.7 57.8 53.0 25.7 35.9 32.8
Western Europe 69.2 36.5 23.8 7.3 12.3 10.5
Central & Eastern Europe 69.2 128.1 49.2 7.0 25.3 25.3
Asia Pacific (all) 33.9 32.4 24.6 7.9 18.6 16.6
North Asia1 41.4 51.7 42.6 17.8 27.2 23.8
ASEAN2 38.9 73.0 40.3 33.4 54.2 98.4
Middle East & Africa3 23.7 56.3 88.9 55.6 9.4 6.0
World 42.6 31.7 19.8 9.6 13.9 13.9
Source: GroupM
f: Forecast.
1
China, Hong Kong, South Korea, Taiwan.
2
Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam.
3
Prior to recent events in the region.
(Figures rounded up.)

Principal sources of annual media growth

Contribution %

  2010f 2011f
North America 11 22
Canada 5 3
US 6 19
Latin America 13 11
Brazil 7 5
Western Europe 15 10
UK 5 3
Central & Eastern Europe 6 7
Russia 3 4
Asia Pacific (all) 49 43
Australia 7 2
India 2 5
Japan1 5 6
North Asia 26 21
China 19 17
ASEAN 9 9
Indonesia 3 4
Middle East & Africa 5 6

Principal sources of annual media growth 

Contribution $bn

  2010f 2011f
North America 3,087 6,124
Canada 1,413 919
USA 1,674 5,205
Latin America 3,451 3,021
Brazil 1,913 1,442
Western Europe 3,949 2,767
UK 1,419 705
Central & Eastern Europe 1,743 2,061
Russia 782 1,094
Asia Pacific (all) 13,242 11,981
Australia 1,840 642
Japan1 1,338 1,631
India 437 1,349
North Asia 6,899 5,684
China 5,077 4,781
ASEAN 2,515 2,467
Indonesia 812 1,136
Middle East & Africa 1,479 1,699
World 26,951 27,654
Source: GroupM
f: Forecast.
1
Prior to events on 11 March 2011.

Even with the acute economic pressures of 2008, US network television may have increased in cost relatively. 2009 was the only weakening in the trend, as network pricing probably fell for the first time for a long time by approximately -3%. In 2009, ITV1 pricing may have fallen back to levels last seen a decade or more ago, the biggest bargain for a long time. In 2010 its pricing rose 16% for adults (and 9% across all UK TV) and both are set to turn in single-digit growth in 2011. (Yet still remain a bargain on the long view.) The upcoming US up-front negotiations will probably see high single-digit, low double-digit increases in cpms in network and cable.

Nevertheless, the trend is clear. Imagine what would happen in the car industry if the price of steel rose consistently by 10% against general price inflation of 3%. Manufacturers would use less steel or find a substitute. That is what is happening in our industry, too. Marketing services, digital and even other traditional media such as radio, outdoor and cinema advertising are becoming more acceptable substitutes.

Don’t expect network television, however, to disappear any time soon. It will remain important. If we were starting a multinational packaged goods company from scratch, we would still use network television to influence the largest number of people in the shortest time at the lowest cost. In fact, free-to-air viewership has actually risen in the last year or two – perhaps a feature of recessions. Clients still need reach, but it isn’t what it was. In the US, for example, primetime network television used to claim 90% of households. A few years ago it was 50%; today it is perhaps only 33%. There are, of course, still programs with significant global or national reach, such as the World Cup final (500 million); the Olympics (400 million in a normal year – but an audience of over two billion for the opening ceremony in Beijing in 2008); the Super Bowl (111 million); and the Academy Awards (38 million).

The largest regular live event audience, however, is none of the above. It is the Chinese New Year Gala on CCTV in China, the rest of Asia and elsewhere, watched consistently by more than one billion – and maybe similar audiences for Indian World Cup cricket matches. These events remain in relatively fixed supply, while the pools of money chasing them are stable or growing. As a result, their prices are bid up. That’s why a 30-second Super Bowl advert still costs around $3 million and an Academy Awards slot around $1.7 million. This is not an easy situation, although it may last.