Blog Post

Barclays: Expect A Pullback In Branded Ad Spending

There are two general rules when it comes to advertising spending these days: when times are tough, marketers tend to take money from brand awareness efforts to campaigns with a clearer return, like lead gen or direct response. The second rule is that nothing can stop the shift from traditional to digital. So it’s no surprise that Barclays has revised its U.S. ad spending projections downward for this year and next, while noting that while display’s momentum may still be strong, it’s not as robust as previously thought.

Specifically, Barclays lowered its total ad spend forecast to 1.4 percent from 2.9 percent in this year. Also, Barclays now anticipates a 4 percent rise in ad dollars instead of a 5.2 percent in 2012. And if it weren’t for the piles of cash likely to flow through next year’s presidential and congressional campaigns, ad spending in 2012 would only be 2.5 percent, says Barclays analyst Anthony DiClemente.

For online, spending will reach $29.9 billion, up 14.8 percent in 2011 and then gain 13.6 percent to end 2012 at $33.9 billion. Barclays previously anticipated a 16.5 percent increase for 2011 and 15.2 percent for 2012. Display should grow 14.9 percent to $13.2 billion, while search gains 14.5 percent to 15.9 billion in 2012. Barclays search forecast has remained unchanged, as the segment is considered to be the last ad category to be affected by a slowdown in spending and is often the first to comeback when ad budgets rise.

The main areas propelling online ad growth are video and mobile. Video remains the fastest growing part of online advertising in general and display in particular with 33 percent compound growth between 2010 and 1015, Barclays estimates.

Search currently represents a 46 percent share of total online spending, compared to banner ads, which the second largest slice, at 24 percent. Despite video’s growth, it pays to keep in mind how small it is, as it represents just 7 percent of all online ad spending.

Avoiding the vague worries about the threat of a double dip recession, Barclays’ reasons for revising its forecast down are attributed to weak estimates for back-to-school sales, pessimism around retail and coming holiday sales, and the increased likelihood that the auto industry’s recovery will sputter next year. After all, auto’s are a bellwether ad category, and it was continued spending by car makers and dealers that helped keep ad spending positive this past year. If auto goes down substantially, the rest of the leading categories could follow as well.

To put Barclays’ views in context, here are some of the recent ad spend forecasts:

— eMarketer expects online to rise 20.2 percent this year and 17 percent in 2012.

— Zenith revised its global ad spending outlook downward ever so slightly to a decent 4.1 percent rise from April’s prediction of a 4.2 percent gain. In addition, global internet advertising was also dialed back just a bit to a still robust 14.2 percent from 14.4 percent three months ago.

— WPP’s GroupM expects global ad growth of 6.8 percent in 2012 called for slowing growth, while online was still expected to grow even faster than previously thought, rising between 15- to 16 percent a year through 2012.

— IPG’s Magna Global said in April that online ads would rise 18.7 percent. It maintains that online advertising is expected to account for 17.3 percent ($30.1 billion) of total ad revenues and it expects this share will grow to 22.4 percent ($47.4 billion) in the next five years. The average growth per year will be 9.5 percent, which is quite strong in an economy expected to grow in the low single digits, on average.