The global spending on the advertising industry is anticipated to decline this year with continued macroeconomic challenges and geopolitical tensions. To make matters worse, the lackluster performance is further expected to continue for the next two years as well. These forecasts were recently made by market research agency Zenith Optimedia that is owned by French advertising services provider Publicis Groupe SA (PUBGY).
Zenith predicts the ongoing political tussle and tensions with Russia and western countries regarding control over Ukraine to truncate growth in the advertising industry to 5.3%. Furthermore, simmering tension in Central and Eastern Europe, North America and the Middle East are expected to trim advertising sales growth to 5.3% in 2015 and 5.9% in 2016. With significant international presence, Publicis is likely to feel the heat of these geopolitical events as well.
The advertising spending in Russia is likely to be the worst hit this year with a paltry growth of 1.7% compared with double-digit growth on the trot since 2009. However, the industry is expected to benefit from positive economic strides in the U.S. – the largest advertising market with job improvements. Consequently, advertising companies such as Publicis, The Interpublic Group of Companies, Inc. (IPG), Omnicom Group Inc. (OMC) and WPP plc (WPPGY) are likely to have a healthy revenue churn in the U.S.
Headquartered in Paris, France, Zenith’s parent company Publicis offers interactive communication services, online direct marketing consulting, social network expertise, e-commerce, search engine optimization, Internet ads, and various forms of Internet and mobile communication services.
Publicis has mostly experienced a decline in its share prices after its failed merger attempt with Omnicom in May 2014. Putting aside the disappointment of the failed merger bid, Publicis is now focusing on digital deals to resurrect its fortunes and reinforce its position as a leading standalone advertising and communication services company. We expect the company to reap these benefits in the long run.
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