Amid the gloom of political campaigning, rising interest rates, uncertain world markets and volatile shares, some good news for retailers, the media and others servicing the multi-billion dollar a year advertising industry.
Thanks to the continuing boom in the internet and Pay TV, another big year of ad spending has been forecast for 2008, even if the overall growth rate will slow because of rising interest rates.
The influence of interest rates cannot be underplayed after the Reserve Bank's warning yesterday (see story above) that Australia faces at least two years of rates at current levels or higher as the central bank attempts to reign in and bring cost pressures under control.
There are a few companies listed on the ASX which stand to benefit, although individual sectors such as newspapers and TV are facing declines in the growth rate, but they may be able to pick up a bigger benefit from the still fast growing spending on internet advertising.
Companies like Fairfax Media, the Seven Network, the Ten Network, APN, Photon, Macquarie Media, Macquarie Radio (not related), Austereo and Seek should be among the main beneficiaries of the forecast, just as they have ridden what has turned out to be a surprisingly strong year so far in 2007.
Except for some small growth in spending in magazines though, 2008 will see all major old and new media outlets experiencing a slowdown in the rate of growth of ad spending in their sectors.
However, the size of the slowdown will be relative as the amounts spent in main media advertising this year are turning out to be far better than originally forecast a year ago and earlier this year when the first estimate was lifted.
Despite this slowing rate of growth, total ad spending will still top the $12 billion figure for the first time next year, hitting an estimated $12.444 billion from the $11.501 billion expected to be spent by December 31 this year.
With the total for 2006 of $10.402 billion, there will have been a two billion rise in ad spending in two years by the end of 2008.
The first forecast for 2008 for growth of 8.15% is only marginally lower than the first forecast for 2007 of 8.43%.
The Sydney based media forecasting and analysis group, Fusion, says the 2007 growth rate of 10.56% is its first estimate and compares to the first forecast of 8.43% growth made this time last year and a revised 9.23% figure earlier this year. Fusion says that because of "new revenue added to both newspapers and outdoor the truly comparable growth figure for 2007 is around 9.25%".
The factors driving this year's strong growth includes the Federal election campaign and strong government ad spending in the lead-up; a couple of state polls, record car sales, a retail sales boom, record low unemployment (despite rising interest rates), no real impact from higher oil prices because the rising value of the Australian dollar has clipped the impact of the higher world prices, and strong job advertising.
Fusion says the rate rises and the targeting of the retail sales boom and jobs growth by the Reserve Bank will help slow growth in spending next year. There won't be the outpouring of spending from a nervous Federal Government as there was this year from the Howard administration. But there will be the Olympics, which will benefit the Seven Network in particular.
The slowing in the rapid rate of growth of internet and TV advertising in 2008 will help cut the annual growth rate from a nominal 10.56% this year, to around 8.15%.
Fusion says however that a slowdown in internet advertising has already appeared "six months" ahead of when it was expected.
It's now expected to grow 38.6% next year, compared to the initial forecast of more than 51% and an amended forecast of 48.1% for this year.
In dollar terms however that will still be well over an extra half a billion dollars, with internet advertising hitting the $2 billion mark for the first time.
That however, will represent a doubling in spending from 2006 to 2008: from $1 billion to $2 billion.
Total ad spending will be up by more than $940 million in 2008, with $540 million of that coming from spending on the internet.
It has gone well past magazines this year and is now a clear third in ad spending behind TV and newspapers.
In fact Fusion has forecast that TV advertising spending will top that in newspapers next year by a mere $55 million.
Pay TV will grow by more than 26% next year after a near 32% rise this year.
Newspaper advertising is forecast to rise 1.12% to $3.25 billion from, $3.486 billion for 2007 and $3.271.6 billion for 2006. TV ad spending will rise by almost 5% in 2008 to $3.580 billion from $3.410 billion expected this year and $3.210 billion in 2006.
The internet will see an estimated $2.004 billion spent next year, compared to the $1.461 billion (it was forecast at a touch over $1.5 billion) expected this year and $1.001 billion in 2006.
Spending on magazines is estimated to rise 2.89% next year to $1.390 billion from $1.351 billion expected this year and the actual $1.313 billion last year,
Radio advertising is forecast to top the billion dollar mark for the first time next year at $1.0409 billion, up 4.75% from the $992.8 billion expected to be spent this year and the $930 million spent in the depressed year that was 2006,
Spending on Outdoor advertising is tipped to rise 5.81 % next year to $455 million from $430 million for 2007 and $378.7 million in 2006. The outdoor rise this year is more than 13.8% on current estimates which makes it the third fastest growing media area after the internet and Pay TV.
The Pay TV spend will top $300 million in 2008 at $355 million a forecast rise of 26.79%
