Interpublic Group of Cos. plans to bolster business in new markets such as Brazil and China as researcher ZenithOptimedia cut its growth forecast for the advertising industry this year amid the European debt crisis.
“I’d like to increase wherever the business is growing,” Interpublic Chief Executive Officer Michael Roth said in an interview from the Cannes Lions advertising festival in France yesterday. The second-largest U.S. advertising company has a $200 million budget for acquisitions, he said.
European and U.S. advertising agencies are relying on faster-growing markets in Asia and Latin America as the European debt crisis hurt sales in their home markets. The global advertising industry is now predicted to grow 4.3 percent this year, down from an earlier forecast for 4.8 percent, ZenithOptimedia said today in a report. Marketing spending slowed in April and May amid fears that Greece would leave the European Union, it said.
From 2011 to 2014, half of the advertising industry’s growth will come from ten developing markets, ZenithOptimedia said. Brazil, India, Russia and China will account for 35 percent of the growth, followed by Indonesia, Argentina, South Africa, South Korea, Thailand and Turkey, the researcher said.
Interpublic may generate one third of its business in markets outside Europe and the U.S. at some point, up from about 28 percent currently, if emerging regions keep growing, Roth said. He didn’t give a time period. WPP Plc (WPP), the largest advertising agency, has also said it will work to get a third of income from these high-growth markets in the next three-to-four years.
Growth in traditional advertising markets is slowing despite the boost from the 2012 European soccer championship and the London Olympics. Together with the U.S. presidential elections, these events are expected to add $6.3 billion to total spending of $502 billion by the end of the year, ZenithOptimedia said.
Roth said more than half of the company’s sales come from the U.S. and another 20 percent to 21 percent originate in Europe, leaving less than 30 percent of sales in the rest of the world. He reiterated a forecast that Interpublic’s revenue will grow 3 percent this year.
To be sure, New York-based Interpublic will still invest in Europe, Roth said.
“In certain markets that are going through some difficulties, we’re still there and we’re looking for transactions,” he said. “But again we’re not doubling down in those markets.”
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