The Voice of Online Marketing | MEDIA KIT | NEWS TIPS
The latest practical news and developments at the intersection of search, email,
social media, mobile marketing, web analytics, online advertising, ecommerce and more.
Marketing News on Twitter Interactive marketing RSS newsfeed
Advertisement
Advertisement
MARKETING JOBS

VSS Forecast: Comms Spending to Top $1 Trillion

Total communications spending will decline 1% in 2009 to $882.6 billion, but will grow 3.6% per year over the next five years to more than $1 trillion,  according to a report from private-equity firm Veronis Suhler Stevenson (VSS).

This growth will make communications the third fastest-growing sector (behind mining and construction) of the US economy through 2013, reports MarketingCharts.

The latest ten-year "Communications Industry Forecast" (CIF) found, not surprisingly, that the current economic downturn is causing several of the communications industry's sub-segments to register their weakest growth in more than 50 years. Nonetheless, four segments are projected to generate more than $100 billion in spending by 2013 - subscription television, professional & business information services, direct marketing, and entertainment media.

Moreover, VSS predicts that the institutional end-user sector of the industry will continue its growth and will be responsible for bringing the vast majority of the industry's incoming dollars. More specifically, institutional end-user spending will remain the largest and fastest-growing communications sector, rising by 5.6% annually as a result of strong gains in business information services, particularly in the marketing and financial services sub-segments, and the for-profit higher education sub-segment of educational and training media and services.

Alternative marketing segments - including branded entertainment and word-of-mouth marketing - will grow at 12.6% annually from 2008-2013 and will contribute to overall marketing services spending growth of 3.4% annually in the period 2008-2013.

Recession Takes Toll

VSS said that the current challenges facing the communications industry are largely the result of the current cyclical economic downturn which is exacerbating the impact of changes that began before the recession.  Over the five-year forecast period, 12 of the 20 major industry segments are expected to show positive growth, with the most challenged segments clustered in traditional advertising, which is now the smallest of the four segments VSS tracks.

The following segments of the industry are expected to grow and shrink over the next five years:

vss-communications-industry-forecast-growing-shrining-august-2009.jpg

Comms: Fourth Largest Economic Sector

The report found that while in 2009 the media and communications industry will endure its first spending decline since the 2001 recession, it is expected to rise from the fourth position to the third fastest-growing economic sector in the US over the next five years, and also rise to become the fourth largest sector overall by 2013, up from the fifth largest sector in 2008. The next five years will see the communications industry increase 20% greater than Nominal GDP which will only increase annually 3.0% by 2013, VSS said.

In early 2009 and as the economy rebounds, communications spending is projected to accelerate and outperform the economy during the forecast period. Growth will be driven by robust gains in many of the same markets generating 2009 growth, such as pure-play consumer internet and mobile services, subscription TV and branded entertainment.  In addition, gains will resume in a number of sub-segments adversely affected by the recession, such as K-12 media, consumer books, outsourced corporate training, custom publishing and business-to-business trade shows.

Direct, Alternative Marketing Drive Future Growth

The institutional end-user sector is the largest and fastest-growing communications sector. Powered by relatively strong gains in professional and business information services and TV programming, spending in this sector rose 6.5% to $241.06 billion in 2008. More moderate growth was found in the education and training and business-to-business media segments. Media usage in the institutional sector also gained as the need to access information throughout the day and in multiple locations became more important, enabling digital materials in the professional and business information services and business-to-business media markets to climb 13.3%.
Spending on branded entertainment soared 12% to $24.97 billion in 2008 as brands sought to engage and connect with target audiences who are increasingly skipping ads and migrating away from traditional media. As more brands incorporate venue-based media into their mix, VSS predicts that overall spending on branded entertainment will grow at a CAGR of 9.3% during the forecast period, reaching $38.88 billion in 2013.

VSS also reported that direct marketing benefited from the same digital targeting trends as branded entertainment as marketers increasingly opt to reach their target consumer with one-to-one messaging. While direct mail and telesales spending declined because of their reliance on such stressed industries as automobiles and financial services, direct marketing still registered a 3.2% increase in 2008 to $106.52 billion, and is forecast to achieve a 5.6 % CAGR during 2008-2013. E-mail marketing performed better, and continues to expand at double-digit rates because it offers a low-cost alternative to direct mail.

Both alternative advertising and alternative marketing services will continue their growth, according to VSS.  Alternative advertising is forecast to have a 12.3% CAGR from 2008-2013, compared to a 3.3% decline for traditional advertising, and only slightly outpaced by alternative marketing services at 12.6%.This trend is driven by gains in online advertising and digital out-of-home. Spending on alternative media as a whole is projected to reach $139.45 billion in 2013, representing 29.7% share of total advertising and marketing spending, up from just 18.2% in 2008.

Traditional Advertising Challenged

The VSS forecast showed that the current economic cycle has accelerated established trends away from mass-market image advertising and toward individualized, technology enabled access to information and entertainment. Changing consumer behaviors have led to declining print advertising spend, particularly in newspapers where spending fell 13.1% to $54.16 billion in 2008, and consumer magazine publishing showed a spending drop of 5.8% to $22.91 billion. These sectors also suffered from budget cuts by local and national advertisers in key categories such as auto and financial services. The difficult economy has also driven circulation spending down as consumers cancel subscriptions.

Broadcast and satellite radio also suffered in the industry decline. Local station advertising, extremely dependent upon stressed economic sectors including auto and home, saw a 7.1% decline to $20.28 billion in 2008. Consumers are migrating away from traditional radio to online social networks featuring up-and-coming artists. In addition, the depressed auto industry is hindering satellite radio growth, as fewer new cars are being sold with such services.

"While we have seen consumer media usage remain generally flat over the past year, the way in which consumers are spending their time continues to evolve,"said John Suhler, VSS co-founder, president and general partner. "No longer are newspaper and magazine subscription purchases and network prime-time viewing the norm. Instead, they are declining and consumers are spending more time with media which they support and pay for as opposed to ad-supported media."

Spending Curtailed on All Fronts

As the economy took its toll on companies throughout the year, VSS found that spending was reigned in on all fronts. This directly affected business-to-business promotions as well as outsourced publishing. Spending on business-to-business promotions, including promotional products and travel marketing incentives, fell 7% as budgets were cut and fewer salespeople were in the field calling on clients. Declining profits, layoffs and trimmed expenses all lined up to hinder growth in the business-to-business promotion market, and spending in the top promotional product category fell by double-digit rates. During the 2008-2013 period, the business-to-business promotion market is forecast to show a 2.9% annual decline.

The forecast is on track with VSS's February 2009 revision for the communications industry.

About the report: The CIF has been published annually by VSS since 1986, with data series dating back to 1975.  The ten-year industry report tracks, analyzes and forecasts spending usage and trends in the four sectors - advertising, marketing-consumer and institutional, as well as numerous sub-sectors.

Search

Related Topics

Advertisement

Subscribe to MarketingVOX|News

Latest interactive marketing news Latest media planning news & facts Latest marketing data & research