Zenith Forecasts Further Ad Market Recovery

Olympics boost North American growth

By Jon Lafayette -- Broadcasting & Cable, 9/30/2012 7:01:00 PM

Media buyer ZenithOptimedia says the advertising business continues to recover in North America, with TV showing solid gains.

With a boost from the Olympics and the presidential election, plus a comeback from the auto industry, TV advertising will finish 2012 up 7% to $62.1 billion. TV advertising will rise another 7% in both 2013 and 2014, according to the Zenith forecast.

Zenith says that given its strong performance during the Summer Olympics, network TV spending is now expected to increase 1% to $17.2 billion in 2012, up the agency's June 2012 projection of a 1% decrease. Zenith sees broadcast spending declining at an annual rate of 1% in 2013 and 2014.

Cable advertising growth for 2012 was revised down slightly to 8% in 2012, 7% in 2013 and 7% in 2014. "Cable now draws a larger percent of ad dollars than network TV, accounting for 12.3% of total advertising spend and 31.8% of total TV spend," the agency notes in a report accompanying its forecast. "Cable will account for 13.0% of total ad spend and 34.1% of TV spend by 2014."

Due to a storm of political advertising, Zenith has revised its 2012 growth forecast for spot TV to 12%, up from 8%. Zenith expects spot to grow 3% in 2013 and 4% in 2014.

"The 2012 spot TV marketplace is extremely volatile with the presidential election at hand. Primaries will be pivotal for candidates and the introduction of the Super PAC has brought political spending to new heights. This category is not classified as ‘political' on a station's rate card and pays top dollar to be on air," the Zenith report says. "Political spending is currently pacing at +90% over the equivalent time period in 2010. This is causing tremendous volatility on all clients' current schedules and increasing market pricing for short-term buys based upon demand."

The TV ad market is also helped by a strong comeback in the auto category, especially local dealers. "There is a strong appetite among consumers for new vehicles, with many holding off coming out of the recession, and automakers are offering deals and incentives to entice these consumers."

Zenith expects spending on syndication to be up slightly (1%) in 2012, flat in 2013 and up 1% again in 2014. "The strength of the comedy and talk genres, an increase in inventory and strong potential for fall newcomers all contributed to our revised projections," the agency says.

Meanwhile, "digital ad spending continues to be strong as consumers spend more time with digital media and advertisers look for new ways to reach them," Zenith says.

Zenith predicts total Internet ad spending will grow at a rate of 17.9% in 2012, 18.0% in 2013 and 18.2% in 2014.

"There is intense marketplace competition to develop new platforms and advance existing ones in an effort to drive scale and improve effectiveness. The race comes from three directions -- the big five (Apple, Amazon, Google, Facebook and Microsoft) who are battling it out to establish full-fledged ecosystems; vibrant startups focused on data, social and mobile; and traditional media companies looking to elevate their digital offering (Nielsen, Viacom, NBC, etc.)," Zenith says. "For the next couple of years, hot topics will include social and mobile advertising, advanced measurement/ad solutions, cross-platform audience measurement and attribution and industry adoption of iGRPs and viewable impressions as the common basis for currency."

Zenith forecasts that online display advertising will increase 11.5% in 2012. Display includes banner, sponsorships and rich media and excludes mobile and social.

For 2012, Zenith expects online video spending to increase 29% in 2012 and continue strong growth, jumping 29% in 2013 and 27% in 2014.

"While TV spending remains strong, marketers are shifting traditional video into online and other digital formats," the agency said. "The start of the new TV season will see the fruition of upfront negotiations that incorporated bits of online video."

Total social media advertising is expected to increase 37% in 2012, 35% in 2013 and 35% in 2014.

Zenith predicts global ad expenditure will grow 4.6% in 2013, reaching $525 billion by the end of the year. "As has been the case since the economic downturn began in 2007, this growth will be led by developing markets, which we forecast to grow by 8% on average in 2013," Zenith says.

Zenith says that North America has had a particularly strong 2012 thanks to record Olympic audiences and heavier than expected political advertising in the US. Despite the tough comparison, the agency expects 3.6% growth in North America in 2013.