Posted on: Tuesday, December 7, 2004
More spending on ads expected
By Seth Sutel
Associated Press
NEW YORK — Advertising spending seems set to grow at a robust pace next year as the economic recovery continues, even without the windfall from the Summer Olympics and the presidential election that triggered a surge in spending this year, a leading ad forecaster said yesterday.
Local advertising, however, will be weaker as major local advertisers such as retailers remain cautious.
The 2005 growth projection follows an expected 7.4 percent overall rise this year.
Coen, releasing his twice-yearly report on advertising trends at a media investor conference sponsored by UBS, said he expected national advertising to grow 7.4 percent next year, while local advertising will grow 4.8 percent.
"The explosive 2004 gains in television due to the Olympics and the elections this year will moderate in 2005," Coen said in his report.
"However, many media that have lagged considerably behind the economy in recent years should see better ad growth next year."
Coen said that many marketers have been "hoarding their resources" even as greater needs for ad spending have been piling up as some brands have become stale and lost ground to cheaper competitors. "As uncertainties and extreme cautiousness diminish, marketers will shift attention away from cost cutting to rebuilding brand positions and growing their total company market share," Coen said.
While Coen said he did not expect a "boom" in advertising next year, he does expect advertising to grow faster than the overall economy. He noted that recoveries in advertising spending tend to lag behind upturns in the overall economy.
For 2004, total U.S. advertising is seen growing to $263.7 billion, thanks in large part to the extra boosts from the Olympics and political spending, which largely benefited TV advertising. However, without the effects of Olympics and the election, Coen said advertising growth would have lagged behind the economy.
Also, the Internet continued to draw more advertising dollars in 2004, with spending jumping 25 percent over 2003.
Spending on direct mail advertising also rose 8 percent, which Coen attributed in part to restrictions on telemarketing spending from the new "do not call" lists.
Another report released at the UBS meeting yesterday also forecast robust growth in global advertising spending for next year as economic trends and corporate profits both show steady improvements.
Steve King, the CEO of ZenithOptimedia, an advertising services firm based in London, said that a return to steady economic growth is likely to result in annual increases of 5 percent to 7 percent in global advertising spending over the next several years.
The ZenithOptimedia report, which uses some different measures than Universal McCann, estimated global growth in advertising spending of 5 percent next year, following growth of 6.9 percent this year — again boosted by the growth spurt in U.S. advertising spending, which makes up nearly half of all global advertising.
By region, King said his firm forecast growth of 4.2 percent in U.S. advertising spending next year versus 6 percent this year, with similar moderation also occurring in other regions: Europe growing 4.5 percent next year versus 5.4 percent this year, and Asia growing 6 percent in 2005 compared with 8.5 percent his year.
Bob Coen, a senior vice president at Universal McCann, predicted that U.S. advertising would rise 6.4 percent next year to $280.6 billion as national advertisers loosen their purse strings following several years of restraint.
