GroupM has downgraded its U.S. and global ad spending forecasts for 2014, reinforcing a view that the ad business is getting tougher. But the media buyer sees a small pickup in 2015.
In the U.S., GroupM sees ad spending growing 3.1% to $170 billion, down from a mid-year forecast of 3.4%. For 2015, GroupM expects spending growth to hit 3.9% in 2015, with digital making the biggest contribution.
Globally, spending is forecast to rise 3.9% in 2014 to $513 billion. At midyear, GroupM had said it expected a 4.5% increase. For 2015, GroupM forecasts a 4.9% gain that would bring global spending to $538 billion.
“The world remains short of demand and uncomfortably short of inflation. However, two stabilizing forces are the falling price of oil, which transfers spending power to the world's consumers, and shrinking trade surpluses, especially China's,” said Adam Smith, GroupM's futures director. “Smaller surpluses help aggregate demand. The Eurozone’s large surplus now makes it the biggest drag on world demand, and it remains the main headwind to ad growth.”
Digital media is taking a bigger part of ad budgets, GroupM said, gaining about two points of share every year. Digital’s share was 24.7% in 2014 and is expected to rise to 27.6%, GroupM said.
“As it relates to media,” said Irwin Gotlieb, global chairman of GroupM, “the proliferation of choice is steadily increasing media consumption (and consequently supply) around the world. The effect of increased supply is a mitigation of media inflation for clients – they can achieve their objectives with minimal increases in spend, thus holding down demand. In conjunction with our improved attribution analytics, these trends are improving return on investment for our clients.”
GroupM said that for the first time, TV's share might be falling from a high of 43%.
“In the U.S. we have downgraded growth in 2014 from 3.4% to 3.1% driven by reduced spending in radio and print. This was partially offset by growth in TV and digital,” said Rino Scanzoni, chief investment officer for North America at GroupM.
“In 2015 we expect growth to accelerate to 3.9% driven by digital media. This represents a slight downward revision from our earlier 4.2% growth estimate,” Scanzoni said. “TV will experience a significant deceleration due to an unfavorable comparison to 2014 which includes the Sochi Olympics and an expected increase in linear TV audience erosion in both broadcast and cable negatively impacting available inventory.”