Advertising looks set to win from the busy summer
Saturday 07 April 2012
Hopes are rising of a significant advertising boom from a triple whammy of feelgood events with the Diamond Jubilee, Olympics and Euro 2012 football championship between June and August.
Analysts have moved to upgrade their forecasts on the back of strong revenue growth from many ad agency groups and some better-than-expected UK economic news.
Patrick Wellington, an analyst at Morgan Stanley, said: "There is a potential substantial boost to UK advertising in 2012, mainly in traditional media." Mr Wellington said commercial TV, outdoor and newspapers should all benefit from the Olympics. "There are 25 official Olympics sponsors and another 17 official suppliers all of whom can be expected to spend incrementally around the Games," he said. "July and August are traditionally the lowest advertising months of the year for ITV and this advertising should come as an incremental boost."
Giasone Salati, an analyst at the broker Espirito Santo, said: "In our view 2012 will be a particularly strong year across the industry." His note Going For Gold highlighted the potential of the Olympics for advertising.
Ad industry sources expect revenues to rise between 5 and 6 per cent across the second and third quarters but said they could rise further.
Optimism has also received a boost after the latest monthly Markit survey of Britain's services sector, published this week, showed its fastest growth of almost two years in March.
Pedro Avery, the managing director of the media-buying agency Arena Media, whose clients include Domino's Pizza and Eurostar, said early indications are that advertising spend will be "higher than expected" over the next three months. "Brands are prepared to support these big events," he said.
Mr Avery warned that some advertisers, particularly high street retailers, were still feeling the squeeze from consumers. "Anybody who has a good business online is doing reasonably well," he added.
Marc Mendoza, the chief executive of the media agency MPG Media Contacts, whose clients include the National Lottery and Nationwide, said: "We were expecting an uplift from the Olympics and it's happening." But he cautioned it is a mixed picture and some brands who are not official sponsors are avoiding advertising around the Games. "They're staying as far away as humanly possible," he said.
Many big global ad agencies, including London-listed WPP and Aegis, have only limited exposure to the UK as they generate the majority of their revenues from the US and emerging markets. Mr Salati at Espirito Santo said WPP should "outperform" because it is "a leading player in political advertising" in a US election year.
Ian Whittaker, at Liberum Capital, is also bullish and rates shares in WPP, Publicis, Aegis and Havas – four of the biggest global agency groups that operate in the UK – as a "Buy".
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