In Depth

Ad Spending Is on the Rise, but Growth Rate May Slow--What's the Deal? Marketers Are Going Private and Public, Buying and Selling, Focusing on Core Brands

By Bradley Johnson
Advertising Age

Marketers in 2011 will boost U.S. ad spending 2.8%, down slightly from 2010's 3.2% growth rate, according to the average of three major media-agency forecasts.

Worldwide ad spending will grow 5.3% in the new year, below the 5.9% growth seen in 2010, according to the average of three forecasts from Interpublic Group of Cos.' MagnaGlobal, Publicis Groupe's ZenithOptimedia and WPP's Group M.

U.S. ad growth in 2010 turned out better than predicted. A year ago, forecasters figured 2010 U.S. ad spending would be flat or down a bit.

Forecasts for 2011 suggest moderate growth in ad spending, reflecting the economy's slow recovery.

Slow ad growth is a welcome change from the recent past: 2009 U.S. ad spending tumbled 11.9% (average of three media agencies), the biggest drop since the Great Depression.

The 18-month recession officially ended in June 2009. U.S. measured-media spending turned north in first-quarter 2010, the first year-over-year quarterly gain since first-quarter 2008, according to WPP's Kantar Media.

Marketers had a busy year of going private, going public and deal making:

--Burger King Holdings was bought by private-equity firm 3G Capital.

--Ford Motor Co. sold Volvo to a Chinese automaker, scrapped Mercury and sold most of Ford's stake in Mazda.

--Fortune Brands announced plans to spin off or sell much of the conglomerate so it can focus on distilled spirits.

--General Motors Co. pulled off the biggest initial public offering in history -- a stock sale valued at $23.1 billion, including common and preferred shares -- as it put 2009's bankruptcy in the rearview mirror.

--Kraft Foods bought British candy maker Cadbury and sold Kraft's frozen pizzas (DiGiorno) to Nestlé (Stouffer's).

--Nestlé sold its 52% stake in eye-care products firm Alcon to Novartis.

--Qwest Communications agreed to be acquired by CenturyLink.

--Unilever agreed to buy hair-care firm Alberto-Culver Co.