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Zenith positive about the US ad economy, not about Europe

MUMBAI: A recent report by a reputed US-based global media agency has provided some optimism in the advertising world. More so, because this agency's forecasts on the ad economy have always been amongst the most conservative.

In its latest report, media major Zenith Optimedia, owned by Publicis of France and the UK's Cordiant group, has actually revised its forecast for 2003 advertising revenue in the US and the projected growth estimates. The report estimates that the forecasted growth will rise to 2.2 per cent from the earlier projected figure of 1.9 per cent. In real terms, this would entail a real growth of 0.2 per cent for US advertising after taking inflation into account.

The report has also forecast a growth of three per cent in US TV Network ad spend and two per cent in radio spot spends. Zenith has also upgraded its forecast for US advertising revenue growth in 2004 to 4.5 per cent from 3.6 per cent. report

Zenith Optimedia knowledge management manager Jonathan Barnard states that the war might shift spending rather than affecting it as long as no untoward events happen.

The report adds that improved corporate profits will drive this growth in advertising. Recently, American corporations have adopted a conservative financial approach wherein they have cut down excess expenses and reduced head counts. It is believed that the corporations will reap the benefits of these moves in this year and companies will be able to spend more on advertising, says the report. However, consumers aren't too happy as the unemployment rate that has topped six per cent.

Consumer growth is heading below one percent but the report mentions that the real driver for ad spending during recession times is corporate profitability rather than consumer spending.

US TV, radio spends:

Zenith has also revised forecasts upwards for the television spends. It now expects that network TV will be up three percent this year, to $16.3 billion. Zenith feels that the current trends in terms of ad inventory sold for the coming TV season augur well for the TV ad spends.

The report adds that the other factors pointing to a strong TV market are the "firm" scatter factor for 2003 despite consumer and stock market weakness. Certain categories such as auto, retail and refinance and real estate have either upped or maintained spends.

Zenith Optimedia has also revised upward its national spot radio forecast for 2003 to two per cent from 0 percent, with auto, telecom and retail as the key drivers.

Outlook on Europe, Japan:

The Zenith report has downgraded its forecast for the six other global advertising economies - five western European countries and Japan.

Zenith has downgraded its five-country European forecast for 2003 to 0.4 per cent from the 1.8 per cent forecast made in December. This extinguishes any hope of real growth this year in the region.

The company also downgraded 2004 forecasts for Europe to 3.2 per cent from 4.2 per cent. Forecasts for Japan have been downgraded too, to 6.8 per cent from -3.5 per cent. Zenith's Barnard feels that this negative outlook is due to regulation and culture in western Europe and Japan.

Outlook on the US:

Zenith predicted that advertising revenues would fall by 1.4 per cent in real terms in the UK this year. In current prices, Zenith slashed its expectations for the UK to growth of 1.1 per cent from 2.1 per cent predicted as recently as December. This fall has been attributed to weak corporate confidence which has stunted advertiser confidence.

The report added that the UK market was flat in 2002, although it fell 2.1 per cent in real terms, allowing for inflation.

Zenith is also predicting UK TV advertising will grow a modest one per cent in current terms, dragged lower by advertisers switching from ITV to cheaper cable and satellite channels. However, the growth of multichannel TV, where ad breaks are longer and more frequent, was positive longer term for the sector.

Press advertising in the UK is expected to see little growth in 2003, with consumer magazines suffering in particular and only outdoor, radio and cinema likely to post real growth, Zenith added.

Reports indicate that Zenith's views contrast with those of Aegis, a rival media buyer and research group, which predicted a 2.6 per cent rise across Europe in 2003. Most forecasters, including WPP's Sir Martin Sorrell, expect a full recovery to wait until 2004, when the US presidential elections and the Olympic Games in Athens will boost demand.

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