Slide1: Outlook for Advertising Expenditure Adam Smith head of knowledge management The Zenith Optimedia Group 21 November 2002


How big?: How big? ‘Traditional’ media  $300bn Everything else  $400bn Newspapers  $100bn


Share of ‘traditional’ media buying: Share of ‘traditional’ media buying Publicis Groupe  11% Interpublic  11% WPP  10% Omnicom  7% Aegis  5%


Worldwide economic growth at current prices 1988-2004: Worldwide economic growth at current prices 1988-2004 % Year on Year Growth Source: IFS/HSBC


...vs. advertising growth: ...vs. advertising growth % Year on Year Growth Source: IFS/HSBC/ Zenith Optimedia


…newspapers vs all advertising: …newspapers vs all advertising % Year on Year Growth Source: IFS/HSBC/ Zenith Optimedia


...vs. newspaper share of advertising: ...vs. newspaper share of advertising Source: IFS/HSBC/ Zenith Optimedia


advertising and GDP again...: advertising and GDP again... % Year on Year Growth Source: IFS/HSBC/ Zenith Optimedia


Real growth in US consumer expenditure and total US advertising expenditure : Real growth in US consumer expenditure and total US advertising expenditure Source: Zenith Optimedia


Real growth in US corporate profits and total US advertising expenditure : Real growth in US corporate profits and total US advertising expenditure Source: Zenith Optimedia


Ad downturns compared: Ad downturns compared 1990: 9 markets down (constant prices) 1991: 10 more markets down 1990 + 1991: 4.4% real contraction 2001: 23 markets down 2001: 6.4% real contraction in one year 2002: 1.4% contraction forecast


Ad recoveries compared: last time(constant prices, big seven markets): Ad recoveries compared: last time (constant prices, big seven markets) Source: Zenith Optimedia


Ad recoveries compared: this time (constant prices, big seven markets): Ad recoveries compared: this time (constant prices, big seven markets) Source: Zenith Optimedia


GDP growth at constant prices 2000 - 2003: GDP growth at constant prices 2000 - 2003 Source : HSBC Q4 2002 % Year on Year Growth


Advertising as a % of GDP 1981-2004: Advertising as a % of GDP 1981-2004 Source: Zenith Optimedia % North America World Europe Asia-Pacific


World economy: World economy Global recovery less resilient than expected in 1H Capital allocation defensive Demand weakening Valuations suggest slower or riskier growth ahead Threats: war, consumer debt albatross


Global advertising - major media: Global advertising - major media 2001 2002 2003 2004 N. America -8.6 -1.1 -0.5 2.6 Europe -5.6 -3.2 0.7 2.7 Asia/Pacific -1.8 1.3 3.8 4.1 Global Major Media: US$m (nominal) 311,944 312,055 322,135 338,880 % change (real) -6.4 -1.1 1.3 3.0 Major media are TV, Print, Radio, Cinema, Outdoor Year-on-year % change, constant prices Source: Zenith Optimedia


2002 v 2001 at constant prices: 2002 v 2001 at constant prices Ad expenditure forecasts by region % Source: Zenith Media


2003 v 2002 at constant prices: 2003 v 2002 at constant prices Ad expenditure forecasts by region % Source: Zenith Media


2004 v 2003 at constant prices: 2004 v 2003 at constant prices Ad expenditure forecasts by region % Source: Zenith Media


2002: forecast worldwide advertising expenditure by medium (current prices): % Source: Zenith Optimedia 2002: forecast worldwide advertising expenditure by medium (current prices)


2003: forecast worldwide advertising expenditure by medium (current prices): % Source: Zenith Optimedia 2003: forecast worldwide advertising expenditure by medium (current prices)


USA summary: USA summary USA 43% of world adspend and 75% of ad recession in 2001 Numbers have stopped tumbling Falloff peaked in 2001 (-9% actual) 2002 cash spend at par with 2001 Quadrennial stimulus Isolated tightness but no trend


Europe summary: Europe summary 24% of global adspend; 15% of 2001 contraction Ad recession ‘only’ 6% constant in 2001 vs US 9% No material growth until 2004 First TV recession ever but pricing fluid: TV will catalyse recovery


Europe: advertising expenditure forecasts: Europe: advertising expenditure forecasts 2002 v 2001 at constant prices Source: Zenith Optimedia %


Europe: advertising expenditure forecasts : Europe: advertising expenditure forecasts 2003 v 2002 at constant prices Source: Zenith Optimedia %


Europe: advertising expenditure forecasts : Europe: advertising expenditure forecasts 2004 v 2003 at constant prices Source: Zenith Optimedia %


Asia Pacific summary: Asia Pacific summary Constant 2% contraction in 2001 compares to 7% contraction in 1998 Japan commands 55% of regional adspend in 2002 vs 81% in 1991 US-dependent trading economies hardest hit: S’pore, Taiwan, South Korea India and China 11% of regional adspend in 2001, forecast 14% in 2004 Asia ex Japan contracts real 2.4% in 2001, to grow 7.0% in 2002


Asia Pacific: advertising expenditure forecasts : Asia Pacific: advertising expenditure forecasts 2002 v 2001 at constant prices Source: Zenith Optimedia %


Asia Pacific: advertising expenditure forecasts : Asia Pacific: advertising expenditure forecasts 2003 v 2002 at constant prices Source: Zenith Optimedia %


Asia Pacific: advertising expenditure forecasts : Asia Pacific: advertising expenditure forecasts 2004 v 2003 at constant prices Source: Zenith Optimedia %


Global advertising - major media*: Global advertising - major media* 2001 2002 2003 2004 N. America -6.0 0.4 2.2 4.6 Europe -3.2 -1.1 2.7 4.8 Asia/Pacific -1.2 1.4 4.0 4.5 Latin America -0.5 -6.9 8.2 10.2 Rest of World 4.1 8.4 9.4 11.9 Global Major Media: US$ Million 311,944 312,055 322,135 338,880 % Change -3.8 -0.0 3.2 5.2 *TV, Print, Radio, Cinema, Outdoor Year-on-year % change, current prices Source: Zenith Optimedia