Advertising spending set for growth spike, says WPP

THE world’s largest advertising group by revenue has forecast ­ad spending in Australia to post its highest growth for five years.

THE world’s largest advertising group by revenue has forecast ­ad spending in Australia will post its highest growth for five years.

British giant WPP said the local market would lift 4.1 per cent to $13.7 billion next year, the biggest improvement since an 8.7 per cent spike in 2010, despite continuing weak demand for advertising in the metropolitan television market.

Of the major trends, the most marked is the movement of ad dollars away from newspapers, which will slow to its lowest rate of decline since 2011 in a further sign that major advertisers are reappraising the effectiveness of the category.

After three years of consecutive double-digit falls, newspaper advertising expenditure is tipped to fall 9.5 per cent to $1.8bn, according to WPP’s annual outlook.

One trend that appears to be abating is digital’s growing appropriation of advertising budgets, with total spending on internet display and classified, paid search and mobile up by 13.4 per cent to $5.7bn, down from a 21.5 per cent rise last year. Australia is the world’s eighth-largest advertising market, and the biggest on a per-capita basis. This year, the Australian advertising market is on course to deliver a lift of 2.8 per cent to $13.1bn after the post 2013-election bounce in consumer confidence stopped after the May federal budget announcement.

The budget lowered consumer sentiment, which caused advertising budgets to contract over the short term.

But the prospect of more advertising money for media companies in 2015 could prompt investors to tune in to listed media stocks after a year when many have been oversold. However, local executives cautioned that the WPP forecast was on the optimistic side, with some predicting a rise of just 2 per cent due to underlying weakness in confidence, and ongoing challenges. A persistently weak advertising market, structural pressures from the internet, and a crop of overseas entrants with limited tax obligations like Google and Facebook have burdened media executives with low earnings growth.

Many are turning to new revenue streams in a bid to protect their core businesses and create new sources of income. Even old enemies are teaming up to draw strength in numbers and spread the cost of entry into new markets.

Yesterday, Seven West Media announced it was partnering with pay-TV operator Foxtel to launch a subscription video on-demand service to counter the arrival of US streaming giant Netflix.

Each company will hold a 50 per cent interest in a joint venture called Presto Entertainment, offering users a massive library of subscription on demand (SVOD) television content and movies to stream over the internet. At the same time, Nine Entertainment Co has joined forces with Fairfax Media on SVOD service Stan.

The study, released by GroupM and prepared by London-based Futures Director Adam Smith, has forecast global advertising to rise by 4.9 per cent next year, just a fraction below a 5 per cent mid-year forecast, taking the market to $US538bn ($650bn).

The principal sources of acceleration are China, with ad spending on course to accelerate to just under 10 per cent. The world’s biggest advertising economy, the US, will improve 3.9 per cent.