LONDON (Brand Republic) - Analysts are warning that the slowdown in advertising spend that has hit the US hard in recent months could spread to Europe.
Speaking to the Wall Street Journal, Goldman Sachs analyst Jonathan Helliwell said, 鈥淲e do expect the contagion from the US to spill over into Europe, and we expect the market to remain nervous in the short term.鈥
His comments are in line with industry estimates made recently by Zenith Media. It lowered its projection for adspend growth in Europe for 2001 by almost 1% to 3.6%, down from 6.3% growth last year. It is still ahead of the forecast for the US but further bad news is expected in the second quarter.
This could be affected by the lack of last year鈥檚 money-makers for European television companies, such as Euro 2000 and the Olympics. Zenith expects ITV鈥檚 revenue to be down 12% from last year in the first half.
The market has already shown some nervousness. Shares in WPP Group, the world鈥檚 largest advertising group, dipped to their lowest level in 18 months to 643p on April 4. Shares in France鈥檚 Publicis Groupe fell 2.2% to a six-month low while Cordiant Communication Group鈥檚 have also been hit.
A major factor affecting share price dips is the ratings given advertising companies by securities firms. Many have cut their ratings due to the cuts in US ad spending. It is a market where WPP, despite being a UK company, has more than half its business and one to which Publicis and Havas Advertising are also exposed.
Cut backs in adspend by European manufacturers, together with the dotcom slide, have also affected the European market, particularly financial and technology public relations agencies.
A reluctance on the part of clients to attempt to renegotiate contracts with advertising agencies but, instead just pull TV advertising, has been cited by investors as a factor in a possible further downturn in adspend this year.