Forecaster says global ads to fall 6.9 pct in 2009

A key advertising forecaster sharply lowered its global ad spending forecast Tuesday, saying the ad market took a substantial turn for the worse in the past few months as companies tightened their belts in the face of an economic slump.

ZenithOptimedia, a unit of French advertising conglomerate Publicis Groupe, now expects a year-over-year decline of 6.9 percent to $453 billion this year, a pace that is worse than the 0.2 percent dip for 2009 it had projected in December.

Even the reliably faster-growing Asia-Pacific region is expected to see declines as trade falls off rapidly.

Ad spending in North America is now predicted to fall by 8.3 percent to $166 billion, the bulk of which is from the United States. U.S. ad spending is forecast to decline by 8.7 percent, worsening from December's projected drop of 6.2 percent for 2009. This year's spending levels suffer in comparison to last year, which was boosted by such special events as the Olympics and the presidential election.

Spending in Western Europe is expected to drop by 6.7 percent, with Spain showing the steepest drop at 10 percent, followed by the U.K. at 8.7 percent.

Asia-Pacific is projected to decline by 3.4 percent, as increases in China and India are offset by a slump in Japan, which comprises 38 percent of ad spending in the region. Central Europe and Latin America also should see declines.

Globally, ZenithOptimedia noted that companies are waiting until the last moment to commit to spending on advertising, which many treat as a discretionary expense. It doesn't see a rebound in ad spending until corporate profits improve. Key is how governments around the world tackle the problem of bad debt and whether stimulus plans will jump-start growth.

In this downturn, consumers are spending more time at home, watching TV and surfing the Internet. It gives a glimpse of why online and TV ad spending should have a better showing.

Global ad spending on the Internet is the only medium expected to see an increase this year, up 8.6 percent to $54.3 billion. Advertisers can more easily measure their effectiveness - such as how often users click - making them more attractive than other media as budgets tighten. However, online ad spending is slowing down from last year's 21 percent growth.

Ad spending on newspapers is expected to fall 12 percent to $107 billion, and spending on magazines is projected to decline by 11 percent to $49.1 billion.

Internet ad growth should be driven by a 9 percent increase in spending on search ads, traditionally the largest generator of online ad revenue. Classified should rise by nearly 2 percent, while traditional display ads should fall by a similar percentage.

Advertising around newer formats - such as Internet video and podcasts - are projected to rise by double-digits. But they comprise merely 12 percent of the online ad market, which itself was 10 percent of the overall ad market in 2008.

Television ads, while projected to fall by 5.5 percent to $173 billion, remains one of the better performers among the different media. ZenithOptimedia said advertisers that slash their ad budgets across the board tend to cut TV last.

Auto ad spending remains grimly weak with some pockets of optimism, such as in France and Germany where government incentives boosted auto sales and thus, advertising.

Ad spending from the financial sector has fallen off sharply, but retail and packaged goods are holding up as they advertise good deals to cash-strapped shoppers.

Shares of advertising companies mostly fell. WPP Group Plc lost 9 cents to $30.97 in afternoon trading while Omnicom Group Inc. was down 58 cents to $26.79. Publicis fell $1.22, or 4.3 percent, to $27.05 over-the-counter. Interpublic Group of Cos. rose 8 cents to $5.24.