1 23 August 2012 Carat forecasts growth of 5.0% for 2012 and 5.3% in 2013 with digital advertising overtaking newspapers sooner than expected Carat, the world s leading independent media communications agency, today publishes its updated forecasts for worldwide advertising expenditure in 2012 and Carat s data shows global advertising expenditure will continue to grow in 2012 and Carat predicts global advertising expenditure will grow by + 5.0%, reduced from +6.0% predicted in March 2012, and global advertising spend forecast for 2013 will grow by +5.3%, down from the previously forecast +5.8% in March These latest forecasts are consistent with our view of the two-speed world whereby we continue to see significant growth from the faster-growing regions of the world versus the lower levels of growth in the developed economies of the US and Western Europe, with Western Europe being impacted by low or negative growth, particularly in Southern Europe. The data also shows that global investment in Digital Advertising will overtake investment in Newspapers sooner than expected, in 2012 rather than 2013, as audiences continue to move online. By media, Digital remains the driving force in the market in terms of growth, continuing to outstrip growth in other verticals, followed by Out-of-Home and Television. Year on year % growth at current prices GLOBAL 5.0 (6.0) 5.3 (5.8) NORTH AMERICA 4.9 (5.0) 5.3 (4.3) USA 4.9 (4.9) 5.3 (4.2) CANADA 3.3 (5.4) 4.3 (6.1) WESTERN EUROPE 0.2 (1.5) 1.1 (2.2) UK 2.8 (4.0) 2.8 (3.4) GERMANY 1.1 (1.2) 1.5 (2.0) FRANCE 0.5 (1.5) 1.9 (1.9) ITALY -5.0 (1.2) -0.4 (1.0) SPAIN -8.0 (-4.7) -5.4 (1.6) C&EE 7.9 (9.5) 8.8 (9.0) RUSSIA 14.1 (15.2) 13.1 (12.8) ASIA PACIFIC 6.8 (8.7) 6.5 (8.6) AUSTRALIA 1.0 (2.9) 2.0 (2.7) CHINA 11.0 (14.7) 9.8 (14.6) JAPAN 2.9 (3.0) 2.8 (0.7) LATIN AMERICA 12.0 (10.7) 9.0 (8.2) BRAZIL 12.8 (10.5) 9.4 (8.0) Figures in brackets show our previous forecasts from Mar 2012
2 Commenting on the Carat forecasts, Jerry Buhlmann, Chief Executive of Aegis Group said: Carat s latest ad spend forecasts show the continuation of two fundamental trends which have changed the advertising industry. Firstly, Digital Media continues to grow materially ahead of all the other media and has overtaken newspapers a year earlier than expected to become the second largest medium in terms of advertising spend, behind TV. The trend of audiences moving online shows no sign of slowing down, as demand for online content and the proliferation of internet and mobile access increases. In parallel to this, the trend of the two-speed world continues, with the rates of growth in the emerging economies remaining well ahead of the US and Western Europe. With these two themes globalisation and convergence the media landscape is becoming increasingly complex. In addition, it is creating exciting new growth opportunities for the global advertisers and changing the demands they place on the advertising groups. In these changing times, for those that have the most focused and specialist offerings, along with the global reach and scale to provide innovative integrated solutions that deliver real results, there are exciting times ahead. Enquiries: ENDS Aegis Group plc: Louise Evans Group Director of Communications Tulchan Communications Susanna Voyle James Macey White Notes to Editors Digital: Digital Advertising or Digital Media or Digital includes advertising spend from Search, Display, Online Video, Social Media and Mobile. Methodology: Carat s advertising expenditure forecasts are compiled from data which is collated from around the Carat network and based on Carat s local market expertise. We use a bottom-up approach, with forecasts provided for 57 markets covering the Americas, EMEA, Asia Pacific and Rest of World by medium - Television, Newspapers, Magazines, Radio, Cinema, Out-of-Home and Digital Media. The advertising spend figures are provided net of negotiated discounts and with agency commission deducted, in current prices and in local currency. For global and regional figures we convert the figures centrally into USD with the average exchange rate. The forecasts are produced bi-annually with actual figures for the previous year and latest forecasts for the current and following year.
3 Carat Advertising Spend Forecasts - August 2012 Summary Carat s latest forecasts for global advertising expenditure remain positive with +5.0% growth expected for a quadrennial year boosted by the events of the UEFA European Football Championship, the Queen s Diamond Jubilee, the London Olympics and Paralympics and the forthcoming US Presidential Elections. However, the benefits from these events are not anticipated to offset the latest macro-economic data which indicates continuing economic uncertainty, particularly in the Eurozone. As a result the latest global ad spend forecasts have been moderated from the +6.0% forecast in March 2012 to today s +5.0% for Within this, Western Europe remains a low or no growth environment, at +0.2%, with declines this year in ad spend in major markets including Italy -5.0% and Spain -8.0%. By contrast in the Central & Eastern Europe (C&EE) and Asia Pacific (APAC) regions, growth remains in high single digit figures for 2012 at +7.9% and +6.8% respectively. These forecasts have been moderated from previous expectations of +9.5% and +8.7% in line with revised GDP forecasts, particularly for China. Resilience in the US advertising market remains, with ad spend forecast to increase by +4.9% this year, and in Latin America the highest growth rates prevail, at +12% in 2012, driven by +12.8% growth in Brazil. For 2013, Carat is forecasting global growth in ad spend of +5.3%, with a moderate recovery expected in Western Europe at +1.1%, improved growth rates in C&EE of +8.8% and continued strength in the US at +5.3%. Ad spend growth in APAC is expected to continue at a healthy +6.5%, however there are signs the pace of growth is easing, with forecasts for the region revised down from previous expectations of +8.6% growth, with China s forecast revised to +9.8% in 2013 and +2.0% in Australia. Growth rates in Latin America are forecast to remain high at +9.0%, with +9.4% growth in Brazil, +14.5% in Argentina and +3.1% in Mexico. By media, Digital Media spend continues to storm ahead with the highest year-on-year forecast growth rates of +17.9% in 2012 and +16.4% in With this trend of strong growth in Digital and declining Newspaper spend, of -2.8% this year, Digital Media spend has overtaken that of Newspapers this year - one year earlier than expected - to become the second most popular advertising medium globally, behind TV. TV continues to dominate with a global share of 46.0% in 2012 (2013 : 45.6%), with particular strength in Asia Pacific, Latin America and the Middle East & North Africa regions where shares are of 50.0% or above. By Region Europe, Middle East & Africa (EMEA) Across Western Europe ad markets continue to be adversely affected by economic uncertainty in the region, with forecasts for advertising spend at +0.2% this year, a downward revision from the +1.5% growth forecast in March Driving this downward trend is Spain at -8.0% and Italy at -5.0%, as well as other Western European markets including Greece at -15.6%, Portugal at-15.4% and Ireland at -3.0%. The German advertising market is stable at +1.1% whilst the UK advertising market is relatively robust with +2.8% growth forecast for 2012.
4 For 2013, predictions are for a moderate recovery in Western Europe at +1.1%. There remains a mixed picture across the region with the pace of growth set to pick up in some markets, for instance France at +1.9%, Finland at +3.4%, Sweden and Ireland at +2%, but decline in others - Spain -5.4%, Italy -0.4%, Greece - 3.7% and Portugal -2.6%. In the UK by media, Digital Media continues to drive the growth in UK media spend at +9.5% this year. Within this Display is at +10% and Search is at +7.5%. Digital Media spend now accounts for over a third of all advertising expenditure in the UK. TV has had a positive start in 2012 with revenues growing by +3.0% from January to June off the back of the UEFA European Football Championship, the Queen s Diamond Jubilee and the build up to the Olympics and Paralympics. That said, there was a two-fold impact on the commercial TV market in Q3; the limited opportunities for TV advertising as the Olympics were broadcast almost exclusively by the BBC and a drop in viewers as BBC viewing levels surged over the Games period. Early signs for Q4 are more positive than Q3 and consequently we are still forecasting slight growth in TV for the full year. Out-of-Home (OHH) advertising has been the clear winner during the Olympic Games, up c.25.0% during Q3, with both sponsors and non-sponsors investing heavily, particularly in and around London. For the year as a whole OHH is forecast to be up by +3.7%. Print audiences and revenues were also boosted by the Olympic Games, up by c.+5.0% during the period (four weeks to end 12 August 2012). Newspapers and Magazines continue the long-term trend of gradual decline and we estimate annual revenue decreases of -2.5% and -3.5% respectively for 2012, as audiences continue to migrate to digital platforms. However, the repositioning of traditional newspapers and magazine publishers as media brands (website, tablet and mobile versions) will help mitigate the rate of decline. Radio is forecast to see a +5.2% growth in ad spends this year maintaining a 3.0% share of the market, whilst Cinema has seen a recovery this year with +0.8% growth, after -5.3% decline in Both Radio and Cinema experienced minimal revenue uplift from the Olympics, despite optimistic expectations. In the UK, by category, the Retail sector has been weak this year as the depressed economy coupled with poor weather has given rise to tough trading conditions in the sector, which in turn has translated through to media spends of -8.7%. It is a similar story for the Automotive market at-5.8%. Entertainment & Leisure is having a better time with strong growth of +7.7% along with Government, Social and Political organisations which have increased their spend by +10.0%, albeit from a low base last year. The C&EE region is forecast to be the second highest growth region in 2012 growing by +7.9%. Growth is being fuelled by Russia which dominates spend in the region with a +14.1% growth rate this year and Turkey has also been performing well with a forecast of +5.8% growth in ad spends this year and +6.0% in By contrast a number of other markets in the C&EE region are witnessing flat or declining spend - Romania %, Czech Republic -4.0%, Hungary -3.4%, Slovak Republic -3.4% and Poland 0%. In 2013 the pace of growth in C&EE is expected to increase to +8.8% with ad spend growth rates accelerating in all of the reported C&EE markets with the exception of Russia where double digit growth rates will continue but dip slightly to +13.1%. In the Middle East & North Africa (MENA) region overall there is a predicted +5.1% growth in ad spend, an upward revision on the +4.6% growth forecast in March. Growth across the region is at +10.1%, with Saudi
5 Arabia +14.9% and Egypt +19.5%. However ad spend is declining in Lebanon -38.5%, the UAE -2.5% and Morocco -4.7%. An increased growth rate is expected next year in the region of +8.8% an upward revision on the previously forecast +6.6%. Asia Pacific (APAC) The current forecast for advertising expenditure in the APAC region is for a +6.8% uplift this year. This is driven by forecasts of ad spend growth in China at +11.0%, Japan at +2.9% and Indonesia at +14.3%, in addition to +9.5% growth in the Philippines, +4.9% in South Korea and +7.8% in India. With the exception of New Zealand at -1.1% and Taiwan at -2.2%, all Carat s reported APAC markets are forecasting growth this year. However the pace of growth has been moderated in a number of markets since Carat s last forecasts in March 2012, with the exception of Indonesia and Vietnam where forecasts have remained the same with Indonesia expected to grow by +14.3% and Vietnam by +16.5%. Advertising spend growth predictions for China have been moderated as signs emerge that the pace of growth in China is easing, following a number of years of very high growth. By media, spend in Newspapers is in negative territory at -5.8%, however, strong growth rates in Digital at +38.5% and OHH at +21.4% continue. By category, the top spending Personal Care category is expected to deliver a moderate improvement of +1.5% this year, while Carat is forecasting double-digit increases this year in Beverages +16.3%, Food +15.0% and Automotives +18.6%. In Australia, ad spend forecasts have been revised down to +1.0% as the market is impacted by weak consumer confidence and spending, and uncertainty in the global markets. On the upside there are indications of a return to market growth after a tough 2011 when the total market declined 1.4% year-onyear. This is set to continue into 2013 with a forecast +2.0% growth. In 2013, the APAC region is forecast to increase by +6.5% with New Zealand and Taiwan back in positive growth, at +0.5% and +2.6% respectively. In China ad spends are forecast to increase by +9.8% and in Japan expectations are for a steady +2.8% increase. Americas Advertising spend in North America remains resilient. Carat is forecasting +4.9% growth in ad spend in the region, held almost steady from +5.0% forecast in March The US advertising market continues to be healthy with spending gains expected across all media in 2012, with the exception of Newspapers which remain challenged at -8%. In contrast Digital Media spend continues to grow at a rapid pace in 2012 with total growth of +22.5% expected. Within this, investment in Digital Video and Social Media see ad revenues growing at the highest rates of +54.0% and +40.0% respectively. The US Presidential Elections this year will inject substantial amounts of money into the marketplace, especially into local television and radio. In Canada, although media demand has been strong, advertisers have been taking a cautious approach in an uncertain economy, committing dollars on a quarter by quarter basis. Current 2012 predictions are for growth of +3.3%.
6 In 2013 the US ad market is predicted to increase by +5.3% and the Canadian ad market is expected to increase by +4.3% as the Retail sector heats up. Latin America continues to have the highest growth rates in the region of +12.0% in Brazil, which dominates spend in the region continues to be strong at +12.8% with Retail up +9.0% this year and the second and third highest spending categories, Automotive and Personal Care up +13.0% and +30.0% respectively. Elsewhere in the region, Argentina is seeing double-digit growth continue at +19.6% boosted by media inflation. Categories showing the highest growth rates are Automotive at +33.0% and Retail +28.0%. In Mexico growth is at a more moderate rate of +4.2% for In 2013 the Latin America region continues to see significant growth rates of +9.0%. With Brazil hosting the FIFA World Cup in 2014, estimates are for advertisers to begin their World Cup campaigns in 2013, helping spends increase by a predicted +9.4%. In Argentina in 2013 a further +14.5% growth is expected, with more moderate growth in Mexico at +3.1%. Sector Breakdown Global year on year % growth at current prices Television 4.4 (5.5) 4.3 (5.3) Newspapers -2.8 (0.0) -1.7 (1.0) Magazines 1.0 (1.8) 1.7 (2.0) Radio 3.9 (5.3) 4.5 (5.2) Cinema 6.2 (4.8) 5.2 (5.4) Out-of-Home 6.9 (8.8) 7.0 (9.2) Digital 17.9 (16.5) 16.4 (13.5) Figures in brackets show our previous forecasts from Mar 2012 Global % Share of Advertising Spend Television 46.0 (45.9) 45.6 (45.7) Newspapers 14.4 (15.0) 13.5 (14.3) Magazines 9.4 (9.5) 9.1 (9.2) Radio 7.0 (7.1) 6.9 (7.1) Cinema 0.6 (0.6) 0.6 (0.6) Out-of-Home 7.3 (7.4) 7.4 (7.6) Digital 15.3 (14.5) 16.9 (15.5) Figures in brackets show our previous forecasts from Mar 2012
7 By Media, Digital Media spend continues to outpace other media with the highest year-on-year growth rates, at +17.9% for 2012 and at +16.4% in 2013, revised up from previous forecasts of +16.5% and +13.5% respectively. As a result of this upward trajectory, share of Digital Media spend is set to overtake Newspapers spend this year a year earlier than expected to become the second most popular medium globally behind TV. Share of Digital Media spend is currently 15.3% globally but exceeds this in Western Europe at 19.6%, C&EE at 16.6% and North America at 16.6%. Share of Digital Media spend is set to increase by 1.6% points in 2013 to 16.9%. Out-of-Home shows continuing strength with the second highest growth rates at +6.9% this year and +7.0% in 2013, boosted by increasing spend in digital out-of-home activity. Cinema media spend showing solid growth rates +6.2% this year and +5.2% in 2013 next year bolstered by continuing technological developments from social media and mobile to digital projection and 3-D, although spend still making up less than 1% of the total market. TV growth rates at +4.4% this year and +4.3% next year are pacing below the market average, however, with 46.0% share, TV continues to take the majority of total media spend. TV is still a dominant medium in Latin America, Asia Pacific and the Middle East and North Africa with share of spend at 50.0% or above in those regions. For print media Newspapers continue to see a year-on-year decline in spend at -2.8% this year and at -1.7% next year. In the US Newspapers are forecast to see a -8.0% decline this year and -4.0% decline in Newspapers share has been falling by nearly a % point each year and is forecast to be 14.4% this year, and down 0.9% points to 13.5% for Magazines are showing more resilience with positive growth of +1.0% for 2012 and +1.7% for 2013, with share of total spend showing a more moderate decline than Newspapers. Magazine share of spend is expected to be 9.4% in 2012 and 9.1% in 2013.