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Western European Advertising Recovery Postponed

18 August 2013

The Western European advertising business is unlikely to return to profitability this year, with adverse economic conditions continuing to impact four of the largest markets-Germany, France, Italy and Spain-according to a new Advertising Intelligence report from information and analytics provider IHS. 

Following contractions in advertising revenue in 2012 and the first half of 2013, the remaining six months of this year is unlikely to bring any relief. Because last year and the first half of 2013 have been slow, advertisers will remain cautious for the period from July to December, postponing investments until 2014.

As a result, IHS forecasts that Germany will see net advertising revenue (NAR) fall by 1.2 percent this year, a larger decline than the 0.7 percent decrease in 2012. France will accelerate losses and incur a 3.4 percent contraction in 2013, a further drop from the 2.5 percent it witnessed in 2012.

However, these declines will pale in comparison to the losses both Italy and Spain will experience. Italy lost 12.5 percent NAR in 2012 and Spain declined 15.9 percent. And while the declines this year will be slightly more modest, they will remain in the double digits, to 10.1 percent and 10.7 percent for Italy and Spain, respectively.

Of the key countries in Western Europe, only the U.K. has experienced NAR gains during the past two years.

Ad nauseam

The main culprit behind the weak advertising performances of 2012 and 2013 is the macroeconomic environment.

After the recession of 2008 and 2009, Western Europe's gross domestic product (GDP) generated eight consecutive quarters of year-over-year growth. However, since the first quarter of 2012, Western Europe GDP has been declining, which IHS forecasts will continue through 2013.

Even though some areas-such as Germany-are not being impacted as heavily, Western Europe as a whole will remain in recession until the fourth quarter. Only meager growth of 0.1 percent is forecast for the region.

Ad hoc

While economic issues are one challenge, the long-term future of advertising market growth is another problem.

For the next five years, the share of global advertising will shift away from Western Europe and North America, the traditional heartlands of advertising and the birthplaces of consumer culture, to other regions that are either emerging or to other already established global powers.

A rising consumer class in the BRIC countries of Brazil, Russia, India and China, along with those in other territories, will capture the attention of advertisers in the coming years. While Western European NAR is declining, all other regions-including the likes of Central and Eastern Europe, Middle East and Africa, Latin America and Asia-Pacific-will see their share of global advertising revenues increase.

In particular, the Asia-Pacific region, which accounted for 18.8 percent of global advertising revenues in 2000, will grow to 39.9 percent in 2017, surpassing North America as the largest region.

Most growth in Asia-Pacific will come from China, given that Japan and South Korea are large but very mature advertising markets that will grow at just low single-digit rates, similar to Western Europe and North America.

Currently the value of Chinese advertising is largely generated in the country's major cities in the East. But as Tier 2 and Tier 3 cities become more advanced, the China advertising landscape will move westward and proliferate in secondary provincial capitals and county-level city capitals.

Other fast-growing countries in the Asia-Pacific region besides China will be Singapore, Malaysia and India.

Read more >> IHS Media service



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