GroupM forecast says U.S. ad spending to increase 3.7% to $168.6 billion in 2008

4 December, 2007


Advertising spending in U.S. measured media is expected to show almost a four percent gain in 2008 compared to the previous year, when spending was up about three percent, according to a new study from GroupM. The forecast is unchanged from the company's previous projections earlier this year

The study, “This Year, Next Year” is part of GroupM's media and marketing forecasting series drawn from data supplied by holding company WPP's worldwide resources in advertising, public relations, market research, and specialist communications. The study included an examination of all major media and took into account a wide variety of factors including the subprime mortgage credit crisis and the current strike by the Writers' Guild of America.

The report said U.S. advertising spending is expected to show a 3.7 percent increase to $168.6 billion in 2008. At the same time, spending in 2007 is expected to come in at 2.8 percent higher than in the previous year. Worldwide spending, meanwhile, is expected to go up 7 percent to $479 billion in 2008 following an anticipated 6 percent increase in 2007

GroupM Futures Director Adam Smith, who oversees all “This Year, Next Year” reports, identified television and the internet as the primary engines of global ad growth with 50 percent and 30 percent, respectively, of additional new investment in 2008. He also said spending on marketing services such as sponsorship and public relations is growing at a faster rate than it is for traditional advertising

Smith also reported that three percent of global ad investment is expected to shift from developed to emerging economies in 2008, the largest such shift recorded.

“The main geographic contributors to growth next year are predicted to be China, with 21 percent of all new money, and Russia and Brazil with each contributing six percent,” said Smith. He added that India will account for three percent and the U.S. remains the second-highest contributor at 20 percent. “This eastward shift is a form of 'advertising arbitrage' in which traditional media dollars are moving to the place where they can do the most good,” Smith said.

The report also predicted the following:
  • Next year's spending expectations largely reflect the Olympics and the U.S. election. It is anticipated that the Games will bring $1 billion in ad spending to national TV and $200-$300 million to local broadcast. The election is even more important to local broadcast and is expected to inject nearly $2 billion in 2008 before facing a tough adjustment in 2009.
  • Internet ad spending is expected to exceed 10 percent of global ad investment in 2008 for the first time ever, and search will comprise 65-70 percent measured online advertising in 2008, up from 50% in 2005. Another first, in one country—Sweden—online advertising is expected to exceed TV The U.K. and Denmark are likely to be the next in line.
  • The Writers' Guild of America strike is not expected to impact U.S. ad spending. It is anticipated that spending will follow the viewing audience and shift from network to cable and possibly spill over into other media if demand causes inflation in cable. However, a prolonged strike could delay pilots and thus impact the 2008 upfront marketplace. An upfront delay would add to uncertainty and nervousness, but might force broadcasters into innovation with new formats.
  • Advertising spending in newspapers is expected to continue to suffer and new softness is already evident in some large categories such as automotive, airlines, and retail. But the continued heavy loss of classified advertising to the internet continues to do the most serious damage.
Media, USD, m 2005 2006 2007f 2008f





NORTH AMERICA 160,752 169,029 174,116 180,961
yoy % 4.2 5.1 3.0 3.9
USA 150,773 158,091 162,585 168,594
yoy % 4.2 4.9 2.8 3.7
LATIN AMERICA 12,107 14,379 16,586 19,287
yoy % 29.1 18.8 15.3 16.3
WESTERN EUROPE 110,988 116,360 121,979 127,171
yoy % 4.4 4.8 4.8 4.3
EMERGING EUROPE 13,967 17,110 20,559 24,227
yoy % 20.9 22.5 20.2 17.8
ASIA-PACIFIC (all) 91,202 96,713 104,370 114,828
yoy % 6.9 6.0 7.9 10.0
NORTH ASIA 29,216 32,810 37,087 44,022
yoy % 12.5 12.3 13.0 18.7
ASEAN 7,410 7,999 8,715 9,529
yoy % 10.1 7.9 9.0 9.4
MIDDLE EAST & AFRICA 8,385 9,630 10,982 12,417
yoy % 11.8 14.8 14.0 13.1
WORLD 397,401 423,222 448,592 478,891
yoy % 6.2 6.5 6.0 6.8

Marketing, USD, m 2005 2006 2007f 2008f





WORLD



PR 5,896 6,530 7,076 7,631
Market Research 23,002 24,473 25,963 27,532
Direct & specialist 226,866 240,271 254,433 268,022
Healthcare 6,193 6,484 6,800 7,200
Rest-of-world sponsorship 1,600 1,700 1,800 2,000
Total sponsorship 30,500 33,670 37,730 43,500
Total 292,458 311,428 332,002 353,884
YOY% change



PR 7 11 8 8
Market Research 7 6 6 6
Direct & specialist 6 6 6 5
Healthcare 4 5 5 6
Sponsorship 9 10 12 15
Total 6.3 6.5 6.6 6.6


For further information about the report please e-mail adam.smith@groupm.com

About GroupM

GroupM is the leading global media investment management operation.

It serves as the parent company to WPP media agencies including MAXUS, MediaCom, Mediaedge:cia and MindShare. Our primary purpose is to maximize the performance of WPP's media communications agencies on behalf of our clients, our shareholders and our people by operating as a parent and collaborator in performance-enhancing activities such as trading, content creation, sports, digital, finance, proprietary tool development and other business-critical capabilities. The agencies that comprise GroupM are all global operations in their own right with leading market positions. The focus of GroupM is the intelligent application of physical and intellectual scale to benefit trading, innovation, and new communication services, to bring competitive advantage to our clients and our companies.


Media contact:

John Wolfe
GroupM
Office: 212-297-7160
Cell: 914-659-8663
Email: john.wolfe@groupm.com

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