THE EXCEPTIONAL decline in advertising spending in European media is easing, but several years will pass before media companies regain the advertising revenues seen in 2007 and early 2008, a new report warns.
Ratings agency Fitch says in its mid-year review of European media that the expected recovery in spending is likely to be slow.
“What happens from this apparent point of stabilisation remains highly uncertain. What money is being spent on advertising is being done on a vastly truncated timescale, allowing the possibility for surprises in both directions,” it says.
Assessing interim results from major media groups, Fitch says most groups that have reported to date have noted a some stabilisation in the advertising market.
“The tone of many companies’ results is somewhat more optimistic than it was six months ago, suggesting they are more in control, albeit with vastly reduced expectations,” says Alex Griffiths, a senior director with Fitch.
The review takes note of results from groups such as British publisher Reed Elsevier, Dutch group Wolters Kluwer, British Sky Broadcasting and advertising giant WPP. It takes account of results from Irish Daily Mail publisher Daily Mail and General Trust.
Fitch expects the recovery in advertising to mirror an anaemic recovery in the real economy. “Company fortunes will vary depending on structural factors, as well as the purely cyclical.”
It says free-to-air television will be the most likely segment of the traditional ad-funded media sectors to see a reasonable recovery, while consumer print will face considerably more challenges.
Fitch says the internet will continue to expand its share of total advertising through the recession, rising to a forecast 16 per cent of total spend across western Europe by 2011 compared with 12.7 per cent in 2008. “This makes sense, as the internet is playing an increasing part in consumers’ lives and advertisers will inevitably want a presence here.”
It calls search the key differentiator in web advertising. “As search is the primary tool by which information is found on the internet, cutting back on spend here, even in a very deep recession, is a risky strategy. Spend here is more analogous to direct marketing spend than media spend.”
Fitch noted an increasing overlap between internet advertising spend and “new media”.
TV will ultimately be relatively mildly harmed by the rise of the internet, as users will increasingly switch to TV broadcast over the internet when possible with broadband and connectivity, it says.
“The situation is in no way as difficult as for newspapers and other consumer print media. These publications suffer from the easy replicability of their content online – leading to price pressure [to zero for most], even as readership falls.”
Fitch says attempts by some newspaper groups to charge online are potentially polarising.
“The publications with content which contains sufficient added-value for them to be able to complete the transition may see it as a real boost to performance. Those unable to make the change may face further pressure.”
