Proceedings

Programme

The Development of the Advertising Industry

The World Federation of Advertisers this year celebrates its 50^th anniversary. The Association was established in Brussels in 1953 as the International Union of Advertisers Associations and was renamed the World Federation in 1983. We will hold our World Congress in Brussels next month.

The WFA is the only worldwide organisation to represent national and international advertisers collectively in their right to freely market and promote goods and services at local, regional and global levels. We promote the positive role of advertising on behalf of industry and commerce and facilitate, through strategic actions and alliances, a business and regulatory environment that upholds the freedom of commercial communication, under threat in many sectors.

2. Objectives and Activities

Our key objective is to ensure that conditions are met throughout the world, thus enabling our members continuously to improve their effectiveness and efficiency in commercial communications. Our lobbying activity is based on the principle that the legal right to produce a product or to sell a service bestows the right to promote, which ensures the consumer’s right to choose. The WFA acts as a monitoring and early warning system, a lobbying instrument, a knowledge centre, and also a best practice sharing point and a meeting point for members and for like-minded bodies, of which the EADP is considered one.

3. Membership

Membership is made up of international and multinational corporations, including direct members that figure in the top 100 global advertisers, such as Proctor & Gamble, Unilever, Danone, Nestlé, Daimler Chrysler and many other well-known names. We have National Advertiser Associations in 46 countries on five continents, with the 47^th country, Hungary, set to join us very soon.

II. The Future of the Advertising Market

1. Advertising on a Global Scale

Commercial communication is a key factor for economic growth. It is an important provider of jobs and helps bring information, culture and entertainment to the consumer at an affordable price. All the big televised sports events and many big cultural events are paid for, in most cases, by the advertisers. For example, advertisers cover 92% of the International Olympic Committee’s budget.

The global commercial communication market is today worth $780 billion, more than Belgium’s GDP. Of that, 42% is advertising, 29% is direct marketing, 20% is sales promotion, 4% is sponsorship, directories accounts for 3%, the internet for 1%, and just under 1% for the rest.

World advertising expenditure reached a peak in 2000, with a total of $325 billion. In 2001, this decreased strongly by roughly -3.8%. 2002 was better, with an increase of just under 1%, but after allowing for inflation, it was still -2%. It is now expected that global advertising expenditure will recover from 2003 onwards and will reach a new height of $355 billion in 2005.

2. Advertising in Europe

In Europe, television still accounts for 34% of advertising expenditure, newspapers for 32%, magazines for 19%, outdoor advertising for 7%, radio for 5%, internet for 1%, and cinema for 1%. Paper advertising remains strong, making up 58% of expenditure.

European advertising expenditure and expectations generally follow global trends. We expect growth in most places in 2003-2005, especially in Eastern Europe. Hungary is expected to grow by roughly 50% between 2002 and 2005, Poland by 22%, and Lithuania by 18%. Those giving the lowest expectations are Western European countries. A downturn of roughly –8% is expected in Ireland, with Finland, Denmark, the UK, Italy, Spain and France also showing slow growth.

3. Economic Growth and Advertising

Alan Greenspan announced in July that the US economy will grow between 3.75% and 4.75%, the fastest growth since 1999, Germany has positive expectations and the global economy will expand by 1.9% in 2003, according to the OECD. Japan’s economic fundamentals have changed for the better, laying the foundation for permanently higher growth.

Zynite Optimedia predicts global advertising growth of 3% in 2003. North America will hit 3%, but growth will be more moderate in the EU region, between 0.5% and 2.6% in key markets. In Asia, strong growth is expected in China, which announced a 7% GDP increase this year.

III. Advertising and Directories

1. Directories in Europe

Demand for graphic paper by end-use in 2001 was roughly 25% for newspapers, just over 18% for magazines, 10% for office paper, 8% for sales promotion, 8% for catalogues, 5% for direct mail, and 2.6% for directories. This is a good indication of how things are going, with directories, in many cases, still being big users of paper.

With figures from the EADP and other sources on key countries, we can compare Germany from 1997 to 2002, with directories representing about 6% of advertising expenditure, more than the global average. In the United Kingdom, probably one of the most dynamic markets, directories represent just under 6% of total advertising expenditure. In France, directories represent only 3.15% of advertising expenditure, but the situation is growing, and directories come to 4.4% of total advertising expenditure in Spain. We also see countries like Poland, the Czech Republic and Hungary, playing a much bigger role in the future.

2. Other Key Markets

In the US, directories are important, representing approximately 7.2% of total advertising expenditure. In Canada, although I only have figures for Yellow Pages, directories make up a high 9.2% of total advertising expenditure. Unfortunately, expenditure in telephone directories in Japan has been decreasing since 1998, now representing less than 3% of total advertising expenditure.

3. Growth of Directories

In most markets, directories are one of the biggest growth areas. According to EADP, growth from 2001-2002 was between 3% and 6% with some countries ranging from –2% to 8%. The amount spent is largely determined by economic factors, being greater in wealthy countries, where demand for goods and services is stronger. But in wealthy countries, competition from other media is fierce.

Regulations also play an important role and it is clear that in countries where there are restrictions for certain sectors on television advertising, for example, advertising budgets can be distributed among other tools, the biggest example being the tobacco industry, which is spending in Formula One because of advertising restrictions.

Directories are largely financed by advertising, which accounts for 67.5% of turnover. This figure drops to just under 60% in the B2B market, but the figures are higher in the B2C market, with three quarters of revenue coming from advertising. It remains at 60% for companies publishing only in electronic media. Directories are therefore not totally dependent on advertising and so are in better shape than commercial television channels for example, that are 100% dependent on advertising.

4. The Advantages and Disadvantages of Directories versus Mass Media

Most major media aim to communicate the existence and key features of products and services, preferably to important or mass audiences. Directories are on the contrary used on demand, when a customer or corporation is looking for a retailer, wholesaler, service provider, or manufacturer able to solve a defined problem, which makes a big difference.

Directories have many advantages, including wide availability, especially in the cases of Yellow Pages or White Pages. This is an action‑oriented media, as customers use directories when they are considering or have decided to take action, very often meaning that they are going to buy something. Because of their longevity – one year at least – consumers return to directories time and again and advertising space and production costs are relatively low, compared to other media. Directories are non-intrusive, a good quality today, when more and more customers look disdainfully at commercial communication.

5. The Future of Electronic and Internet Advertising

Advertising on internet is still only 1%, so can we really afford to go exclusively online, forgetting print? The Dot Com disaster that started in April 2000 was largely due to companies thinking that simply being a Dot Com was tantamount to having a good business plan. We now know that it is not enough, but cannot know how intensively B2C consumers will use online directories.

Directories also have disadvantages, such as market fragmentation, as they are essentially a local medium, and market proliferation. There is an increasing number of specialised directories, offering specific products to specific target groups, only in some cases with good results. Information becomes obsolete between editions, although going online is a potential solution to this. Creativity is often limited, but it is improving, and lead times are long.

6. Print versus Electronic Directories

The future of printed directories still hangs in the balance. If we believe that content will migrate to web-based directories or CD‑Rom editions, the question still remains as to what speed this trend will go at, and if technology will enable us to provide more creative advertising using sound, video and links to advertiser web pages via PDAs and mobile phones.

IV. Advertising Expectations

1. WFA Media Charter

We put the WFA Media Charter together because of big expectations vis à vis the media.

2. Performance

Advertisers need media owners to provide evidence of the physical performance of their media, such as independently audited circulation data, subscriber data, or broadcast footprints. Some years ago we had a problem in Japan, when our National Association noticed that only 50% of television commercials ordered and paid for reached the air. This was a difficult situation to resolve, because Densu was controlling and blocking the situation. After our intervention, there now exists a system in Japan whereby each time a commercial is aired, a signal is sent to a receiver, which notes which commercial it is, at what time and on what channel, giving us full control again.

Advertisers need timely access to accurate, consistent, objective media research data that matches their information requirements. We need data to measure and assess the performance of each media vehicle and the effectiveness of its contribution within multimedia campaigns, within which directories mostly fall. Advertisers also need data that both describes media consumption and enables them better to understand the perception and the reactions of their target consumers.

Advertisers believe that the best way to initiate, manage and shape audience and circulation measurement is through joint industry committees (JICs), which comprise media owner, agency and advertiser representatives, which we have now set up in many countries. This was successfully achieved for television and radio on a worldwide level and we have now a worldwide standardisation on audience measurement for television, radio and for the press in many countries. This has not yet been set up for the internet, as this new media still represents less than 1% of global advertising expenditure, but advertisers, agencies, publishers, and also the media, have committed to launching a system to measure audiences on internet.

V. Conclusion

We invite you, the directory publishers, to open a dialogue in order to achieve a strong and fruitful cooperation. This can be achieved at national level, in cooperation with our National Association members, or centrally with our Secretariat in Brussels.