Zenith, GroupM cut global ad spend growth forecasts
- WPP's GroupM and Publicis' Zenith media buying agencies are tempering global ad spend predictions for 2017 and 2018, according to The Wall Street Journal. GroupM lowered its December forecast of 4.4% global ad spend growth to 3%, and Zenith is predicting 4% growth this year, a reduction from its June forecast of 4.2%.
- Two factors that led to the revised predictions include a slowdown in growth in China as well as political uncertainty in the U.K., per the Journal. GroupM changed its outlook for the Chinese market's expected growth of 3.8% this year, compared to a previous forecast of 7.8%. Zenith is more optimistic with a 6.9% growth prediction for China, up from the 6.6% forecast in June but down from a 7.7% December prediction.
- GroupM's parent company, WPP, released its latest earnings report in August with a rougher outlook, including 2017 growth forecasts cut from 2% to 1% or less due to global spending slowdowns from CPG companies and a drop in ad spending in China.
While the revised forecasts from GroupM and Zenith don't exactly line up — GroupM sees greater sluggishness ahead — the trend lines are not very encouraging following what's already been a rough financial year. The slowdown in the Chinese market is happening after a period of rapid growth in what might be an alarming development. GroupM's China business pointed to Kantar data that sees a "consumer pause" on top of increased TV regulation and a digital space that's running out of room, per the Journal.
The news solidifies that the traditional agency space must brace for slower business in the year ahead and possibly enact greater belt-tightening measures. CPG giants like Unilever and Procter & Gamble — two of the top ad spenders in the world — have cut back their ad budgets considerably this year, especially in regards to digital channels. P&G and Unilever reduced their digital advertising budgets by 41% and 59%, respectively, between January and May of 2017 compared to the year-ago period, according to MediaRadar data. This has had little impact on sales for the companies, suggesting they will continue to rethink their budgeting in a way that might hurt agency business.
On top of spending being down, brands have recently become more active in renegotiating deals and shifting more marketing operations in-house. Another disruption is the growing presence of consultancies like Accenture and Deloitte, which are buying up marketing and advertising shops and snagging more brand clients. According to a Forrester Research, more than 60% of marketers are willing to hand over their business to consultants.
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