European Ad Growth to Slow in 2005

Philip Stone January 10, 2005

European ad growth is forecast to be a bit less in 2005 than in 2004 with only Germany among the major countries expected to see growth improvement, according to media agency Carat.

Germany experienced slight negative growth in 2004, but is expected to grow by 1.3% in 2005. Other countries, notably, Italy, the UK, France, and Spain will better the German growth, but at percentage rates lower than in 2004.

Overall Europe, which saw a 4.8% 2004 growth, is expected to slow to 4.4% in 2005.

The Internet, which saw ad growth of some 20% in 2004, should see similar if not higher growth in 2005. Although the Internet only accounts for some 3% of total ad spend, that percentage will increase from year to year and what worries many newspapers is whether the Internet’s increased advertising revenues will come at their expense.

According to Nielsen/Ratings, the number of online advertisers in Europe in 2004 increased 11% over 2003.  Not only that but some countries – Sweden, France and The Netherlands – saw banner ads increase by some 25%.

The Carat forecast is similar to one by Zenith Optimedia in London both agreeing that overall advertising growth rates over the last three years cannot be sustained in 2005. Commenting specifically on the British ad spend, Zenith Optimedia noted 2004 was a good year because of improving corporate fortunes and the Euro 2004 soccer competition.

One clue to how 2005 will shape up is watch the spend by telecoms and the automobile industry. In the UK, telecom advertising grew less than 1% in 2004 while autos declined 1.2%. 

Globally, Carat estimates the 2004 growth rate stood at 6%, but expects 2005 growth to dip to 4.9%. In the U.S., which saw a 5.8% increase in 2004 due to elections and the Olympics, growth is expected to slow to 4.5%.

Major US newspaper groups are still wary about making predictions for 2005, but most agree that the one area they need to see a major improvement is in national advertising. Retail and want ads are holding okay, but the national advertising spend is still down which hurts newspapers like the Wall Street Journal and the New York Times – the latter having spent much time and effort in the past years to become more of a national newspaper than just a New York newspaper. That still hasn’t stopped the New York Times from raising its rates 5% this year.