ZenithOptimedia cuts 2009 ad forecast

LONDON (Reuters) - Global advertising spending is set to fall 6.9 percent this year to $453 billion (304 billion pound) with the Internet the only medium to attract higher expenditure on ads, media agency ZenithOptimedia said, cutting a previous forecast.

In forecasts released on Tuesday, ZenithOptimedia predicted the rate of decline would slow towards the end of the year and said spending might pick up in 2010, although visibility is limited. It had in December predicted a flat 2009 market.

The agency, part of French advertising group Publicis PUBP.PA, blamed "unprecedented economic problems" for the expected decline, saying this had led to poor corporate confidence and consumers putting off big purchases.

"Since we released our last forecasts in December the global ad market has taken a substantial turn for the worse," said ZenithOptimedia, whose customers include British Airways BAY.L, Hewlett-Packard HPQ.N and Nestle NESN.VX.

Television, still the most popular medium with advertisers, will increase its share of advertising budgets to 38.6 percent from 38.1 percent as cash-strapped consumers spend more time at home watching TV and advertisers stick to what they know and trust.

In absolute terms, however, TV advertising spending will decrease by 5.5 percent and broadcasters will suffer disproportionately as a growing number of digital channels fight for their share of that budget.

Newspapers will suffer most as consumers increasingly turn to the Internet, with spending predicted to fall 12 percent.

Spending on Internet advertising is set to rise 8.6 percent, down from 20.9 percent growth in 2008, driven by consumers searching online for bargains as well as advertisers favouring the medium for its trackable results and innovative methods.

UK-based media research firm Screen Digest, however, predicts a 5 percent drop in U.S. online advertising this year, after growth fell to 2.6 percent in the fourth quarter of 2008 from 15 percent in the first nine months.

Even spending on search-related ads, online advertising’s most dynamic segment, saw its growth halved in the fourth quarter of 2008 in the United States, while online display advertising fell for the first time since the crash of 2001-02.

Ad spending in North America, the world’s biggest ad market, is set to fall 8.3 percent to $166 billion, ZenithOptimedia says, partly because of hard comparisons with 2008, which contained the U.S. presidential elections and the Olympics.

The worst regional drop is seen in central and eastern Europe, at 13.9 percent, because of weakening local currencies and lower hopes for the long-term prospects of some markets.

Latin America, where most economies are still growing, is seen suffering least with a drop in ad spending of 2 percent.

Ad spending by retailers is seen as relatively robust, as retailers launch and seek to publicise budget brands to appeal to increasingly value-conscious consumers.

Insurers who depend on direct response to ads are also seen as maintaining expenditure, as are makers of fast-moving consumer goods such as toiletries or light bulbs, who have hundreds of products they need to keep in the public eye.

Automotive and airline spending is seen as staying weak, although leisure travel, especially from countries with strong currencies where travellers may seek to exploit weak currencies in target destinations, is still being promoted.

“If governments manage to tackle the bad debt poisoning the credit markets, and if their stimulus programmes kick-start economic growth, then advertisers should start to regain their confidence,” ZenithOptimedia said.

“At this point we forecast 1.5 percent growth in global ad expenditure in 2010 followed by 4.5 percent growth in 2011, but these forecasts will be revised in the light of new information,” it said.

Reporting by Georgina Prodhan; Editing by Gary Hill