ADVERTISING INDUSTRY

Advertising Industry Today in Global Perspective

Advertising Industry Today in Global Perspective

Introduction

As economies started to recover from the collapse of real estate-fueled bubbles in much of the world, 2010 brought a period of relative stability—and in many instances improvement - compared to the upheavals experienced during 2009. While painful adjustments to a state of equilibrium will take many years for some economies, especially Greece and Ireland, other nations such as China and India continued to rocket ahead as if the global financial crisis never occurred (Perrault, 2009). In 2011, countries posting growth will more than compensate for the relatively small number of laggards. Under these conditions, some sense of normalcy is in place for the ad-supported media economy during 2011. Globally, and in constant currency terms, we expect growth of 5.4% during 2011, slightly slower than the 6.9% rate we now expect for 2010.

These figures compare with our prior expectations for 4.5% and 5.6% we previously published for 2011 and 2010, respectively. In general, our expectations have improved somewhat - typically by more than a half percent - for all years going forward. We expect advertising growth to average 6.3% each year.(a) But assessing the true state of the global advertising economy requires an assessment in dynamic currency terms (accounting for changes in currencies), as this reflects the growth that will actually be experienced by participants in the global advertising economy.

Because they reflect changes in exchange rates, dynamic currency growth rates arguably reflect the rate of growth that analysts and advertisers alike should consider when assessing the long-term strength of the industry. This frame of analysis takes on greater importance in light of volatility in global currency markets. Practices including Quantitative Easing and other forms of de facto currency management by governments have the effect of artificially (and perhaps temporarily) altering exchange rates. In dynamic currency terms (and from a US Dollar perspective) we expect global advertising growth of 9.2% in 2011, in line with the trend in 2010.

Discussion

Over the following five years we expect growth to average 7.3% in dynamic currency terms through 2016. This assumes that the Euro and Yen depreciate 1.6% and 1.5%, respectively, while the Chinese RMB appreciates 6.5% over the five-year time frame. For purposes of comparability with current conditions and forecasts made by others, all other figures in this report will be conveyed in constant currency terms, unless otherwise stated. Dynamic currency growth rates for all countries (and media within each country) are included in the spreadsheet versions of our global forecast models. In 2011, we expect the fastest growing markets to include Argentina, China, India, Kazakhstan and Ukraine. Over the years leading up to 2016, Argentina, China, India, Kazakhstan and Serbia will be the fastest growing countries (Cravens, 2010).

The slowest growing markets in 2011 include Croatia, Greece, Ireland, Portugal, and Spain. And looking further ahead, we expect France, Ireland, Japan, Portugal and Spain to grow the least between 2012 and 2016. Not surprisingly, varying growth rates will result in ...