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Think BR: Advertisers hold firm in face of global challenges

The uncertain global economy might be causing a few nerves, but it is having little negative effect on ad budgets, writes Christian Schmalzl, global investment director at MediaCom.

Christian Schmalzl, global investment director at MediaCom

Christian Schmalzl, global investment director at MediaCom

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Watching the news should make any marketer concerned. If the global economy really is in a bad way, then what will happen to their budgets?

However what we see in most markets is evidence of resilience rather than reductions.

Economic concerns have yet to affect advertiser plans outside Greece and countries facing similar debt challenges, but marketers are still nervous about increasing spending.

Overall the global ad market will be around $500bn in 2011, above the level achieved in 2008.

The debt crisis in Greece, general financial woes in the Eurozone, unemployment in the US and the general lack of economic leadership in the developed markets haven’t stopped the upward trend.

Indeed, one of the traditional indicators for Q4 and the start of the following year is showing impressive growth. Ad pages in Vogue’s September editions are showing strong increases in the US, UK and Germany.

Germany is up 19% and the UK up 9%. The US edition is now at 582 ad pages an increase of 10% on 2010 (but still well behind the record 727 pages from 2007).

Other media also indicate that we can be similarly optimistic about early 2012 in Europe. TV slots in Q4/early 2012 for Germany’s leading media vendors are 96-98% sold out, although this has been helped by slightly improved discounts.

In the UK, the Rugby World Cup has created positive momentum, the picture is similar in Scandinavia and the US has just experienced a very strong upfront market.

Looking forward there are further reasons to be optimistic. The summer Olympics traditionally adds £1bn to global adspend, while the US Presidential election will contribute a further $4bn dollars, particularly boosting the local broadcast market. Together these two factors should add around 1% to global adspend.

Finally, the BRIC markets continue to power ahead. China’s TV market is expected to grow by 15% this year, Russian adspend will be up 13-15% and India will grow by 22-24%. An increase of 9-10% in Brazil sound almost moderate in that context. The current prediction is that 2012 will see even higher growth rates (between 2-5 percentage points above this year’s numbers).

In these markets the challenges for marketers will be to keep hold of their best staff as the battle for talent intensifies, and keeping up to date with media inflation: where is the real price benchmark and who is the right partner for negotiations and closing deals?

So while adspend may be down 20-22% in Greece, 2% in Italy, 4% in Spain, 6% in Ireland, 5% in Portugal and 4-6% in Japan, the rest of the world shows no immediate signs of double-dip advertising recessions.

At this stage, advertisers are sticking to their planned Q4 expenditure and plans for early 2012.

Globally the biggest challenge is one of mindset. As spend approaches pre-recession levels, marketers are tending to become wary again.

In the past, the markets often experienced a decade of stability and then a short (and sometimes sharp) recession - before getting back to a longer period of growth.

Now the macroeconomic circumstances are keeping everybody on their toes - crisis or recessionary conditions are less the exception but rather an ongoing threat that can hit anytime.

The result is that everyone will be keeping an eye on costs. Regardless of their budgetary plans advertisers want to ensure expenses are flat in 2011 and 2012. 

Christian Schmalzl, global investment director at MediaCom

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