Group Press Releases

Carat Revises 2006 Global Advertising Spend Forecast

London, UK

Carat revises 2006 global advertising spend forecast from 5.7% to 6.0%;
2007 raised from 5.5% to 5.8%
World’s two largest markets, US and Japan, see improving outlook;
Europe steady overall

Carat, the leading independent media communications agency, today publishes revised forecasts for global advertising expenditure in 2006 and 2007.

According to our latest forecast, global advertising expenditure is expected to grow at 6.0%, up from its previous forecast of 5.7%. 2007 global advertising expenditure is forecast to grow at 5.8%, up from the previous forecast of 5.5%.

The most significant change to regional forecasts comes from Asia-Pacific, where advertising expenditure is forecast to grow by 7.2% in 2006 (June 2006 forecast: 6.4%) and by a further 7.4% over 2007 (June 2006 forecast: 6.8%). The single biggest factor in this change is the improvement in the region’s largest market, Japan, after a lengthy deflationary period, with a near doubling of spend on PC-based and mobile internet. Television and magazines are expected to show solid mid-single digit increases, offsetting declines in radio and out-of-home. China will continue to show strong growth at around 20.0% in 2006 and 2007. Other countries showing double-digit growth in the region are India, the Philippines and Indonesia, and these trends look set to continue in 2007.

Growth in the USA is forecast to accelerate from 4.0% in 2005 to 5.4% in 2006, moderating slightly to 5.2% in 2007. One-off factors, such as the mid-term elections, have contributed to solid growth in TV, the largest medium, in 2006. Although smaller markets, out-of-home and cinema are growing well, reflecting the attractiveness of ‘captive’ audiences to advertisers today. The market for newspapers has been flat, and magazines and radio both show low single-digit growth. Once again the key USA market driver has been online, growing at some 20%.

Growth in Europe is stable, and broadly in line with our June 2006 forecasts, at 4.4% in 2006 and 4.1% in 2007. Within this, however, certain countries have seen a weakening outlook, while others have become more positive.

France is expected to show growth of 4.8%, well ahead of the 2.7% forecast in June and ahead of GDP growth. Much of this comes from demand for online, in particular in the telecoms, financial services and travel and tourism categories. However, we anticipate a return to a slower level of growth in 2007 at 2.0%, with the presidential election the first half of the year. Deregulation of television advertising by retailers in 2007 is expected to increase demand for television inventory. In World Cup year, Germany is expected to show a return to growth, albeit at only 1.9% (June 2006: 2.1%), and 1.5% in 2007, consistent with our June 2006 forecast. Italy is expected to show a stable positive trend in 2006 at 3.4%, boosted by the Torino Olympic Games, with slight moderation in 2007. Spain continues to prove one of Europe’s strongest markets. A strong performance from television, with new digital entrants, and a growing newspaper market, boosted by free titles, as well as new ‘spoken’ formats in radio underpin forecast growth of 4.6% in 2006 and 4.0% in 2007.

However, 2006 has been a tough year in the UK advertising market, with commercial television significantly underperforming previous years in terms of audience delivery and revenue. We expect UK television revenue to be down by nearly 7% in 2006, along with weak demand in newspapers, particularly in regional titles. Net growth of 1.0% in the UK in 2006 reflects the strength of online, with total internet expenditure forecast to grow by 40%, outstripping magazine display advertising for the first time.

We forecast that online advertising expenditure in 2006 will increase by 27%, up from the previous forecast of 25%. This is equivalent to a 5.2% share of global adspend in 2006, up from 4.3% in 2005, and we expect this share to increase further in 2007, to 5.7% of global advertising expenditure.

Commenting, Robert Lerwill, CEO of Aegis Group, said:

“These forecasts show a healthy and encouraging picture overall for both 2006 and 2007, despite variations from country to country. We are seeing a respectable increase in advertising and marketing investment by brands across virtually all categories. The most noticeable trend here is the continuation of powerful growth in digital, as online continues to make in-roads in most marketing departments, reflecting the behaviour of today’s consumers.”

For further information contact:

Charlotte Elston
Aegis Group plc
+44 (0) 20 7070 7708

Chris Boothby
Aegis Media International
+44 (0) 20 7550 3216

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