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Economic downturn affecting ad spend, but digital growth still stronger than traditional
Date: 02/01/2009
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Worldwide
ZenithOptimedia's latest ad spending projections show that marketers are slashing their budgets in all corners of the world.
In October, ZenithOptimedia projected that worldwide advertising spending would reach $506.4 billion in 2008 growing to $526.6 billion in 2009. The December estimates tell a much different story at $491.6 billion and $490.5 billion for 2008 and 2009, respectively.
According to ZenithOptimedia, worldwide online advertising spending was projected to reach $51 billion in 2008 and $61.7 billion in 2009. Now those numbers have also been reduced to $49.9 billion in 2008 and $58.7 billion in 2009. Online advertising is taking a hit, but the blow is much softer than that felt by traditional advertising.
US
There seems to be more bad news about the economy every day, and falling ad spending numbers are part of the mix. Although online advertising is still on a positive growth curve, eMarketer's revised projection, benchmarked against the latest Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) data, puts US online ad spending at $25.7 billion in 2009. That is only 8.9% over the $23.6 billion that will be spent in 2008.
In August, before the full impact of the economic slowdown was revealed, eMarketer predicted online ad spending would grow 14.5% in 2009.
Not only is the new projection lower, but recovery is expected to take longer. In 2010, online ad spending growth will return (barely) into the double digits at 10.9%, and in 2013 it will only hit 13.5%.
Even paid search, which has grown at an outsize pace for years, will see a mere 21.4% rise in spending this year.
Again, the slowing is relative, since paid search spending growth will still outstrip the overall online market through 2009. There's a reason paid search will stay robust through the economic downturn, according to David Hallerman, senior analyst at eMarketer.
"Especially in economic turmoil, search is more trackable than any other ad format," said Mr. Hallerman. "At this stage, it is a tried-and-true format that is supporting online growth."
UK
Earlier this year, eMarketer estimated that spending on UK online advertising would hit £3.36 billion ($6.41 billion) in 2008-a rise of 27.1%. These figures were based in large part on the extraordinary growth of UK online advertising through early 2008.
According to the Internet Advertising Bureau UK (IABUK), PricewaterhouseCoopers (PwC) and the World Advertising Research Center (WARC), the Internet's share of all UK ad spending rose from 2.5% to 18.7% in just five years.
Then the roof fell in.
Now the UK, like most countries throughout the world, is facing an economic crisis. In fact, the International Monetary Fund predicts that the UK will experience a deeper recession than any other developed nation in 2009, with the economy shrinking by 1.3%, and struggling to reach 0.4% growth in 2010.
As a result, eMarketer trimmed its projections for UK online ad spending in 2008 and 2009 to £3.34 billion ($6.15 billion) and £3.58 billion ($5.30 billion), respectively.
Note: Shifts in the currency exchange rate will cause a plunge in the dollar value of the UK's online ad market in 2009.
"The good news is that even though advertising in traditional media is down sharply, online is bucking the trend, at least to an extent," says Karin von Abrams, eMarketer senior analyst and author of the new report, UK Online Ad Spending.
Still, 2009 will cast a cloud over the industry.
"Budgets are being trimmed, marketers will be less experimental and the focus will be on getting the best from proven strategies," says Ms. von Abrams. "Fortunately, many forms of online advertising, such as paid search and e-mail marketing, rank high in terms of accountability and return on investment."
As in the US, where advertisers are moving millions of dollars from traditional media to the Web to take advantage of greater measurability and cost-effectiveness, there will be a similar trend in the UK in 2009, though the rate of growth in online ad spending will fall below 10%.
For more information, visit eMarketer
