Digital Ad Spending To Overtake Print
Global digital advertising spend will outstrip newspapers' print revenues for the first time next year, according to forecasts from Aegis Group's media agency, leaving traditional publications scrambling for growth.
In its first forecasts for 2013, Aegis Group's Carat predicts the global advertising market, for digital and print combined, will grow by 5.8 per cent next year, only just below the 6 per cent forecast for 2012.
Since August, Carat, one of the world's largest media buying agencies by spending, has halved its forecast growth for the European media market to 1.5 per cent this year and trimmed its North America prediction to 5 per cent, despite the uplift of the London Olympics and the US presidential election.
Globally, television is expected to continue robust growth, up by 5.5 per cent this year and 5.3 per cent next. But most of the media industry's growth lies in digital, with Carat forecasting a rise in clients' spending of 16.5 per cent in 2012 and 13.5 per cent in 2013, taking its total share of ad budgets to 15.5 per cent next year.
That is ahead of newspapers' 14.3 per cent share for 2013, but still far behind TV, steady at 45.7 per cent.
Jerry Buhlmann, Aegis chief executive, said print media continued to thrive in less-developed media markets such as India and China.
"Newspapers are actually growing in a lot of the faster-growing regions," he said. "The global picture is not quite as uniformly gloomy as it appears to be in developed markets."
Mr Buhlmann was speaking as Aegis, among the top six marketing groups, announced strong results for 2011, with like-for-like revenue growth at 9.9 per cent, ahead of rivals such as WPP , and better than most analyst expectations.
Excluding July's sale of Synovate, the research unit, revenue rose 20.6 per cent to £11.4bn in 2011. A strong fourth quarter, up 12 per cent on a like-for-like basis, improved on the third. Pre-tax profits grew 32.3 per cent to £161.8m. Aegis plans to pay £200m in special dividends off the Synovate sale.
Excluding this one-off payment, total dividends for 2011 increased by 16 per cent to 3.2p a share, which Mr Buhlmann described as "a clear indication of the confidence we have in Aegis Group's future".
â— FT Comment
Aegis investors might be forgiven for thinking its recent performance has been too good to be true. Some rivals might have imagined that the agency group lacked the scale to win global commissions such as the $3bn General Motors contract, which Aegis took from Publicis in January. Competitors often infer that such deals come at the expense of profitability, but despite several new business wins last year, Aegis' operating profit margin is, at 17.4 per cent, up there with the best of them thanks to its pure media-buying business. The only disappointment is that all this is already comfortably reflected in its price/earnings ratio, 14 times Citigroup's 2012 forecast, piling the pressure on Aegis to maintain its performance.
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