Credit crunch will not hit adspend with 6.7% rise expected

Ad expenditure will increase next year on the back of the Beijing Olympics, US Presidential elections and the Euro 2008 international football tournament.

However, even though the global credit squeeze is dampening economic growth around the world, ZenithOptimedia does not expect the ad market to follow suit.

The global media planning and buying agency claims the ad market will be more resistant to economic conditions than it was during the last two recessions.

It argues that, unlike the periods leading up to the last two downturns, advertisers have not been increasing their budgets faster than warranted by economic growth.

Instead, over the last few years ad expenditure has roughly tracked the economy, and has remained at 0.92%-0.93% of GDP.

The last downturn also followed a period of heavy, one-off expenditure by dotcom and telecoms companies in an attempt to establish their brands and generate profits.

These companies spent their investment capital on advertising instead of building up their business, and when the crash came their money was lost for good, ZenithOptimedia said.

But the Publicis Groupe-owned media agency said the new generation of dotcom start-ups seeking investment capital in 2007 are basing their business model on selling advertising; so instead of adding demand for advertising space, they are increasing its supply.

Although the housing downturn and credit squeeze will hit property and finance advertising in advanced economies like the US, the ad market will be boosted by $6bn worth of adspend linked to the Olympics, the Presidential and Congressional elections in the US and the European football tournament Euro 2008.

ZenithOptimedia also predicted that internet advertising will continue to take share from other media as it passes three milestones over the next three years.

In 2008, internet expenditure is expected to overtake radio advertising; in 2009, it will to attain a double-digit share of global advertising; and in 2010, it will surpass magazine advertising with 11.5% of total adspend.

This article was first published on brandrepublic.com