Prognostic high-wire act
Prognos AG and SevenOne Media expect advertising spending to be on the rise again in 2003
Many participants rubbed their eyes at the presentation of the latest medium and long-term study on the development of advertising expenditure in Switzerland. The prospects presented by Josef Trappel from Prognos AG last week exceeded even the boldest optimists. Trappel is the project manager of the study, which was commissioned by SevenOne Media for the second time. According to his statements, the slump that has now lasted for two years should come to an abrupt end in the coming year.
And not too tightly. While the Basel Institute is still forecasting a minus of 1.4% for the current year, advertising expenditure is expected to increase again by a whopping 6% or 272 million Swiss francs in 2003 (see tables).
While such forecasts are balm for the beleaguered media, it was not entirely clear where Prognos AG gets its confidence from. Not only were their advertising market forecasts surprising at the presentation, they are also much more optimistic than the rather gloomy outlook that the publishing experts told WerbeWoche in August (WW 28/02). Nobody dared to believe that things could pick up again quickly. The majority opinion was that growth in advertising expenditure would not return until the second half of 2003 at the earliest, or even 2004.
The reasons for the discrepancy are obvious: Prognos AG based its calculations on overly optimistic economic forecasts. The Basel-based augurs continued to assume economic growth of 2.3% for 2003. However, this figure no longer corresponds to reality and has long since been revised downwards. The State Secretariat for Economic Affairs (Seco) is currently forecasting economic growth of only 1.7% for the coming year, while other economic research institutes are even predicting only 1.5%.
"We have dared to perform a forecasting high-wire act in difficult times," said Trappel, qualifying the statements in his extremely optimistic advertising market forecast. "The microeconomic framework data and trends are just as contradictory as the statements made by industry experts." Reservations are therefore appropriate. "Even in view of the impending war in Iraq, economic development remains a key uncertainty factor," said Trappel.
Future high-flyers are TV, outdoor and online advertising
If Prognos AG's optimistic forecasts come true despite all the unanswered questions, the predicted advertising blessing should bring growth rates of 5% or more for all media types. According to Prognos AG, the high-flyers of the coming years will be television, outdoor and online advertising. These media types will succeed in further expanding their share of total advertising expenditure.
Poster advertising, the only media category to increase by more than 3% even in the crisis year 2002, can feel downright euphoric. Trappel calculates an increase in its share of advertising expenditure from 13.8% today to 14.8% in 2006. For television, he predicted an increase from 10.9% to 11.4% in the same period.
Online advertising, which has dramatically lost importance over the past two years, can also expect a strong comeback. Next year, it will more than double from the current CHF 14 million to CHF 29 million. And the climb is set to continue in the years after that with double-digit growth rates. However, Trappel also urged caution here, as Prognos AG had already been far too optimistic about the development of the online market last year. "Online is still very volatile and therefore remains a particular challenge for forecasting," admitted Trappel.
The Basel futurologists were unable to identify any bright spots for newspapers. If developments go their way, their share of advertising expenditure will fall from the current 46.5% to 45.1% in 2006. As a reminder: in 1991, newspapers still collected 54%. "The creeping erosion will continue. Because only a few newspapers are well equipped for the future," diagnosed Trappel. He predicted a comparatively carefree future only for free newspapers and the Sunday press.
A year ago, when Prognos AG presented its first long-term advertising market study on behalf of SevenOne Media, the forecasts were too optimistic, as reality now shows. This has been corrected in the current edition: all of last year's forecasts for advertising expenditure have been weighted downwards by CHF 150 to 250 million per year in the current edition of the study. It is to be expected that Prognos AG will also have to announce downward corrections when the study is presented next year.
Itext links teletext and TV spot
SevenOne Media (Switzerland) is now offering a worldwide advertising innovation in Switzerland under the name iText: The linking of TV commercials and teletext. It works like this: During the iText spot, viewers are prompted to switch to teletext. There, a special form of advertising is automatically broadcast alongside the commercial, providing viewers with additional information and contact options. iText was launched by SevenOne Media (Germany) last August as a world premiere at the Telemesse. "The response from the industry was impressive. Experts spoke of the first step towards genuine, interactive television services," said Christian Gartmann, Managing Director of SevenOne Media (Switzerland) AG. The cost of the new advertising tool is 15 percent of the net price of the commercial in question (dse).
Forecast net advertising sales
by media type
Net in CHF million 2001 2002 2003 2004 2005 2006
Newspapers 2 150 2 098 2 207 2 279 2 348 2 399
Consumer magazines 346 344 361 372 384 393
Trade press 390 377 396 409 423 432
Television (incl. sponsorship) 494 489 522 543 577 605
Radio (incl. sponsorship) 129 129 137 142 150 156
Outdoor advertising 603 623 678 716 757 785
Cinema advertising 40 36 39 40 43 45
Other advertising media 404 396 410 420 429 435
Total excl. online advertising 4 555 4 493 4 750 4 922 5 112 5 250
Online advertising 15 14 29 45 59 67
Total incl. online advertising 4,570 4,507 4,779 4,967 5,171 5,317
Source: 2001 Wemf, Prognos AG
Forecast until 2012
2006 2012 Change 2006/2012
GDP nominal in CHF bn 487 590 Ø growth 3.2% p.a.
Inflation rate Ø 1.5% p.a.
Net advertising sales in CHF bn 5.3 6.5 Ø growth 3.5% p.a.
Advertising intensity in % of GDP nominal 1.09 1.11 + 0.02% points
Newspapers in million CHF 2399 2864 Ø growth 3.0% p.a.
Market share in % 45.1 43.8 - 1.3% points
Television advertising (incl. sponsorship) in million CHF 605 757 Ø growth 3.8% p.a.
Market share in % 11.4 11.6 + 0.2% points
Online advertising in CHF million 67 147 Ø growth 14.0% p.a.
Market share in % 1.3 2.2 + 0.9% points
Source: Prognos AG
