Magna Global Forecast Shows Shift to Digital is not One-for-One

Last October, the analysts at Magna Global adjusted their 2012 ad market projection down from 4.8% to 2.9%. Since then, the economy has improved slightly. As a result, the media unit at IPG Mediabrands once again revised its prediction, up, and the year-​over-​year revenue growth is now expected to be 3.7%.

The analysts noted that the early growth in 2011 slowed significantly by year-​end. While the year ended up by 2.9% and the market totaled $147.4 billion, the spending was still far lower than it was at the end of 2007 — $168.7 billion. When direct marketing is added to the core media numbers, the total ad spending is projected to reach $177.7 billion this year and would represent a 2.3% jump over the ‘like-​for-​like’ measurement in 2011.

The strengths in the 2012 market include national, state and local ad spending. Related spending by Political Action Committees is also expected to be high. Overall, political spending will reach $2.5 billion in TV advertising. And  summer growth will also come from the Olympic Games which should generate $630 million in ad spending. Analysts believe long-​standing problems such as unemployment numbers exceeding 8% and general economic weakness will be the factors that hold back ad spending.

Look for spending by media type to change by the following percentages:

  • Broadcast TV +8.5%
  • Total TV +6.8%
  • Online +10.9% (Comprised of paid search +12.6%, online video +22.4% and mobile +44.2%)
  • Out of home +4.0%
  • Newspapers ‑6.0%
  • Magazines ‑5.2%
  • Radio ‑0.8%

Analysts also expect continued erosion of the direct marketing channels this year. Online and mobile alternatives are increasingly attractive to marketers. As a result, traditional directory publishers could see revenues drop by 19.1% and traditional direct mail spending could also decline by 1.9%.

Vincent Letang, head of global forecasting at Magna, emphasizes that the ongoing drop in traditional media is not likely to be made up in digital spending. “There’s some evaporation in the process. Advertisers can reach their communication goals more efficiently in some cases.” This trend partly explains why the overall shift from traditional to digital is not a one-​for-​one trade and why the ad market has not yet risen to the spending levels of 2007.

[Source: MAGNAGLOBAL Releases Media Owners U.S. Advertising Forecast. Magnaglobal​.com. 24 Jan. 2012. Web. 8 Feb. 2012; Morrisssey, Brian. TV, Web Break from Slumping Ad Market. Digiday​.com. 24 Jan. 2012. Web. 7 Feb. 2012] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.