Advertising set for mild 2010 recovery-forecast

By Kate Holton

LONDON, July 6 (Reuters) - The downturn in global advertising is approaching its lowest point and, after a fall of 8.5 percent in 2009, the industry should see a mild recovery in 2010, a leading media agency predicted on Monday.

ZenithOptimedia said it had revised down its forecast for 2009, from an earlier prediction of a 6.9 percent drop, after the first quarter came in worse than expected.

WPP's (WPP.L) GroupM agency said in June it expected global advertising to drop 5.5 percent in 2009 before a mild recovery in 2010.

"Faced with extreme uncertainty, advertisers in most sectors planned for the worst and cut their costs in anticipation of steep drops in revenue," the Zenith report said.

Of the different platforms, the Internet is the only medium expected to grow in 2009, while television, cinema and outdoor advertising are set to decline by less than the overall market.

Advertisers say using the Internet allows brands to be flexible and see consumer response rates, which is important during a downturn.

Zenith forecast Internet advertising expenditure growth of 10.1 percent in 2009 and said it expected the medium to account for 15.1 percent of all advertising expenditure by 2011, from 10.5 percent in 2008.

"Most of this growth will come from paid search, which is an ideal method of reaching consumers looking for bargains," the report said.

"In the U.S. we predict search advertising to grow 20 percent in 2009, while traditional display grows 3 percent and classified grows just 1.8 percent.

However with the move of money from print to online, the newspaper industry has been hurt. Newspaper advertising was predicted to shrink 14.7 percent while magazines face an even tougher time as luxury advertisers pull back.

Zenith said the sectors of finance, autos and business travel had all suffered steep revenue decline while retail, fast-moving consumer goods and value products fared better.

"For all sectors the shape of the rest of the year is becoming clearer," it said. "Q2 was not quite as tough as Q1, and we have held our expectations for the rest of the year steady, as signs emerge that the downturn is approaching its nadir."

For 2010, Zenith predicted a recovery and growth of 1.6 percent.

"Looking at the different regions, those that went into the ad downturn first will suffer the most and come out of it last. We expect North America to shrink a further 2.4 percent in 2010, after shrinking 3.7 percent in 2008 and 10.3 percent in 2009." (Editing by David Cowell)