New Uncertainty in 2010 Ad Outlook

After several months of positive forecasts about the future of the U.S. ad market, GroupM came out with bad news at the end of June.  The firm predicts ad spending in the U.S. will fall 1.3% in 2010. This drop will lower the market to $145 billion for the year.

The way Rino Scanzoni, chief investment officer at GroupM, sees it "the U.S media marketplace has clearly bottomed out earlier this year and we expect moderate growth in 2011 consistent with GDP  (gross domestic product) improvement.” Scanzoni, in an interview with Media Life Magazine, says that ad spending is a lagging indicator. The industry won’t improve until the GDP improves. 2011 will be the year, says Scanzoni, when the U.S. ad industry will finally record a increase after 3 down years. Spending will reach $149 billion – a 2.5% increase over 2010 levels.

Even with local political spending taking place , Scanzoni doesn’t see local TV markets recovering this year. While national TV may achieve a 2–3% growth rate next year, local TV will drop because of a lack of political campaigns. Moderate growth may come to radio in the next couple of years but the print newspaper industry, Scanzoni points out, faces “continued decline.” For this year, GroupM’s analysts predict a rise only in digital and out-​of-​home advertising.

Overall, GroupM’s 2010 forecast for the entire U.S. ad market is bearish compared to the projections made by Barclays Capital and Magna Global, which are both looking for 3% increases. Of course, plenty can change between now and the end of the year. But these numbers serve as a reminder that the ad industry is closely linked to and moves in concert with the general economy.

[Source: Bender, Ruth. WPP’s GroupM Raises Global Ad Spend Forecast for 2010. Dow Jones Newswires. 24 Jun. 2010. Web. 2 Jul. 2010; Vasquez, Diego. Not-​so-​cheery outlook for ad spending. MediaLife​.com. 29 Jun. 2010. Web. 5 Jul. 2010 ] 
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.