Advertising Market will Grow in 2010, says Research of ZenithOptimedia

The situation on the global market of advertising will change in 2010, as the market will grow by 0.9 percent after the fall amid the global financial crisis, experts forecast.

Companies spent USD 437 513m on advertising campaigns in 2009, while the figure will increase to USD 441 188m in 2010, says the research by ZenithOptimedia. Revenues from TV commercials will rise by USD 3m in 2010, while revenues from newspaper ADs will be over USD 6m and exceed USD 60m.

The internet is the only medium that has grown this year. The downturn has accelerated the structural shift of budgets from traditional media to the internet; in a time when marketing departments have to justify every dollar they spend, the rapid and clear returns offered by internet advertising are more attractive than the longer-term brand-building benefits offered by other media. We forecast internet advertising to grow 9.5% this year, followed by 12% to 13% annual growth over the next three years. In 2012 we expect the internet to attract 16.2% of all ad expenditure. The gap between the internet and newspapers has narrowed from 26 percentage points five years ago to 11 this year, and we forecast it will be just four percentage points in 2012. We expect the internet to overtake newspapers to become the world’s second-largest advertising medium by the time we are half way through the next decade.

Paid search is the engine of internet growth: we expect it to grow 15% globally this year, and forecast consistent 14%-15% annual growth over our forecast period. Internet display, by contrast, is only growing by 6% this year, while classified is up just 2%. We do expect display and classified to accelerate in 2010 and 2011, but paid search is steadily increasing its market share. We forecast paid search to attract 53% of internet ad expenditure in 2012, up from 50% this year.

Television has suffered less than other media because television viewing rises in a recession (it’s a cheap but absorbing form of entertainment), and because its brand-building power is a great complement to the internet’s strength in generating response and sales. We still expect television advertising to be down 7.6% this year, but its market share has increased from 38.2% to 39.2%, and we expect it to continue to outperform the market over the next three years.

Newspapers and magazines have clearly suffered the most from the downturn, which has exacerbated their structural problems of falling consumer interest and substitution by new media. By 2012 newspapers and magazines will be 26% and 28% respectively below the peak levels they reached in 2007.

The advertising market will not show significant growth until 2012, the company says. The global economic crisis has inflicted major damage to the advertising market of the USA, Europe and Japan. These markets will show unimportant growth in 2011. Lesser damage was inflicted to South East Asia and Latin American markets, but the losses were considerable anyway. Rise in advertising costs will make up 7 percent in Europe, 8.1 percent in the Pacific Ocean Region (excluding Japan) and 2.3 percent in Latin American counties.

As to the advertising market of Georgia, the sector suffered from the first strike following the Georgian-Russia 5-day hostilities. According to the statistics, revenues from TV commercials fell by USD 1m in September 2008 compared to September 2007. IPM, a Georgian representation of AGB Nielsen Media Research, disseminated information referring to TV MR Georgia, according to official price lists of TV Chambers (excluding commercial ADs and TV commercials on sponsorships, logo, SMS ADs, scrolling text), revenues from TV ADs in 2008 equaled USD 4 637m, while the figure totaled USD 5 051m in the same period of 2007.

According to the one of the researches of TV MR Georgia, 12 452 7841-second commercials were sold in January-November 2010. Imedi TV Company ranks first in the list with 2 513 427 seconds, Rustavi 2 is second with 2 156 046 seconds and Music Box is third with 1 573 850 seconds.

According to the same research, Magti, a cell communications company, is a major customer of commercials with 7 828 insertions in 2009.

Year Brand\Variables Insertions
2005 Colgate 11.130
2006 Magti 18.315
2007 Geocell 14.062
2008 Beeline 20.101
2009 Magti 7.828

The situation on the market worsened after sales on certain markets fell amid the global financial crisis, experts note. Companies reduced their costs in several directions, including on advertising campaigns. Companies cut advertising expenditures in the sectors of furniture and interior, real estate, restaurants, aviation, automobiles. Banks also diminished orders for advertising bank products in 1H09, but in September banks increased orders again for advertising revised service terms and bank products on the market.

The Georgian economy grew by 2.0% in 2008, much more slowly than the 12.4% seen in 2007. Georgia has not escaped the effects of the global economic downturn - although, in truth, political instability is more of an issue in this market - and ad market growth slowed to 10.1% in 2008.

Adspend is expected to grow by nearly 70% this year, though, largely thanks to an excellent performance by TV. Internet expenditure is also expected to show impressive growth in 2009, but since it only accounts for 0.2% of total expenditure at present, it does not have such a large impact on the overall growth figure.

The ad market is still in its infancy in Georgia; 2009 will be the first year that total ad expenditure will exceed US$100 million. TV is the dominant medium, accounting for 78% of the market in 2008.

Indeed, it is only within the last three years that press, radio and outdoor advertising have been widely used and monitored, and Georgia has no established new media industry as yet.

According to the research of ZenithOptimedia, the Georgian advertising market grew by 40 percent in 2009 compared to 2008.

The advertising market revenues will make up USD 127.8m at the end of 2009, while the figure did not exceed USD 90.8m in 2008, ZenithOptimedia says. The figure includes all commercials excluding preferences and discount rates.

Share of TV commercials in total revenues makes up USD 105.5m, radio commercials – USD 8.4m, outdoor advertising – USD 5.4m, journal Ads– USD 4.5m, newspaper Ads – USD 3.9m, online Ads – USD 0.5m.

According to the 2008 research, TV commercial is the most popular Ad product in Georgia and its share on the market stands at 77.6 percent, while radio commercial is second with 6.7 percent, outdoor Ad is third with 5.9 percent, newspaper Ad is fourth with 5.1 percent, journal Ad is fifth with 4.6 percent and online Ad is sixth with 0.2 percent.

Kote Batmanidi – company revenues does not depend on the length of the sold airtime, because companies can offer various strategies to customers. Companies may offer discount rates or various campaigns. “Moreover, it is of crucial importance that Imedi TV Company broadcasts for 24 hours and, therefore, it has more resources”.

Under the current legislature, TV Companies are able to use only 15 percent of airtime for commercials, while before 2008 TV Companies could use 20 percent of an hour airtime. The old requirement has been removed from the legislature, but TV companies adhere to a certain standard, under which 12 minutes is used an hour for commercials. Practically, no one violates this norm.

GDP index is an important criterion to calculate the rise in the advertising market of this or that country. New companies are able to make contribution to the advertising market growth if they make influence on GDP rate growth. Rustavi 2 and Imedi TV companies are two major players on the television market of Georgia. If both of them show logical advertising approaches, if they do not introduce damping tariffs on the market and the market remains transparent, the advertising market will grow, while damping tariffs will “spoil” both the advertising market and the customers.

Specialists note that the fourth quarter has occurred the most profitable with 40 percent in total revenues of the advertising market. Based on this factor and the forecast of Georgian Prime Minister Nikoloz Gilauri for GDP growth in 4Q09, the year of 2009 may end with positive dynamics, but if GDP fall rate makes up 4 percent at the end of 2009, the advertising market will face many difficulties to improve the reduced indicators of revenues.

ZenithOptimedia is one of the world's leading global media services agencies with 218 offices in 72 countries.

Key clients include AlcatelLucent, BBC Worldwide, Beam Global Spirits & Wine, British Airways, Darden Restaurants, Electrolux, General Mills, Giorgio Armani Parfums, Kingfisher, Lactalis, Mars-Wrigley, Nestle, L'Oreal, Puma, Polo Ralph Lauren, Qantas, Reckitt Benckiser, Richemont Group, Sanofi-Aventis, Siemens, Thomson Multimedia, Toyota/Lexus, Verizon, Whirlpool and Wyeth