Media Agencies Lower Global Ad Spending Forecasts
September 11 2017 - 3:35PM
Dow Jones News
By Alexandra Bruell
Media buying agencies Zenith and GroupM have lowered their
expectations for global ad spending in 2017 and 2018, due to
factors ranging from political uncertainty in the U.K. to slowing
growth in China.
WPP's GroupM is expecting 3% global ad growth in 2017, down from
the 4.4% it predicted last December.
Publicis Groupe's Zenith predicts global ad spending will grow
4.0% in 2017, reaching $558 billion by the end of the year,
according to the company's new report. That's down slightly from
the 4.2% growth it forecast in June.
"Advertising expenditure grew ahead of the wider economy for the
third consecutive year in 2016, but we expect it to fall behind
over the next three years," Zenith stated in its updated
report.
In its latest earnings report, WPP blamed disappointing results
and a grim outlook for 2017 on a steeper-than-expected slowdown in
global ad spending by packaged-goods firms, among other factors. In
its updated ad forecast, the holding company's media agency group
also indicated that a reduction in ad spending growth in China is
partly to blame for the slowdown. Pivotal Research analyst Brian
Wieser highlighted the drop in a note to investors.
GroupM is predicting that ad spending in China will grow by 3.8%
in 2017, compared to its previous expectations of 7.8%, according
to the company's report. Zenith is predicting 6.9% growth in China,
which is up from 6.6% it predicted in June and down from the 7.7%
it expected in December, according to Mr. Wieser.
"Multinational CPG names appeared to spend a lot less in China
in 2016, but this is only TV and print, and tells us nothing about
the migration to digital these advertisers surely make," GroupM
said in its report. GroupM's China operation also attributes a
slowdown in growth in the region to "a consumer pause, as evidenced
by Kantar data; further TV regulation; and digital running out of
room as it approaches 60% market share."
The Chinese economy "is slowing down after years of blistering
growth, and the ad market is slowing alongside it," said Zenith in
its latest report.
China will still trail the U.S., "the leading contributor of new
ad dollars to the global market over the next three years,"
according to Zenith. "Its growth is slowing as its scale
increases," the company stated.
The media agencies also lowered expectations for ad spending in
the U.K. while only slightly reducing U.S. growth forecasts.
GroupM's growth forecast for the U.K. dropped from an expected 7.2%
growth to 4.1%. Zenith had already significantly reduced its
predictions for spending in the region in June, but reduced it even
more to 0.7% in its latest report, according to Mr. Wieser. The
firm attributed the dip to political uncertainty, among other
factors.
Each firm has its own methodology, but it's not immediately
clear why their forecasts in the U.K. and China are so
different.
Zenith expects North American ad spend to grow 3.6% this year,
and it's predicting an average of 3.4% growth per year to 2019.
Write to Alexandra Bruell at alexandra.bruell@wsj.com
(END) Dow Jones Newswires
September 11, 2017 15:20 ET (19:20 GMT)
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