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Slow Growth for Ads Seen in 2008

Dec 12, 2007  •  Post A Comment

This is the time of year when people start thinking about the coming year, so while others are making resolutions, people in the advertising business are making projections.
One seer who’s been at this for years, Universal McCann senior VP/director of forecasting Bob Coen, presented a rather gloomy outlook for the 2008 U.S. ad market by estimating a growth rate of only 3.7%, which would place total ad spending at $294.4 billion.
“The immediate future of the advertising industry is presently confronted with change, evolution, opportunities and uncertainties,” Mr. Coen said. “The climate in the U.S. and around the world could be much worse than we now foresee if recession occurs in the United States next year, which we do not presently expect.”
That wan forecast for next year comes on top of a downward revision for 2007 to a paltry 0.7% gain. While economic growth in the U.S. was only slightly lower than expected for 2007, Mr. Coen said advertising appears to have become less important as a percentage of gross domestic product.
While not exactly robust, ad spending will be healthier in 2008 than in 2007 because of extra demand, Mr. Coen said.
“In the opening quarter of the year, the Super Bowl, which is a highly desired advertising vehicle, should post revenues about last year’s level. The new schedule of the political primaries will probably help to keep the prices up for most months in the first half of next year; the Beijing Summer Olympics should lead to extra spending for special Olympic promotion tie-ins during the summer quarter; and by early fall, election advertising will pick up significantly to help lift ad demand in many media during most of the second half of 2008,” he said.
Mr. Coen sees national advertising growing at a 5.5% clip in 2008, while there will be virtually no growth in local advertising.
“Spending by local marketers is not likely to change much compared to this year,” he said. “The weakness at the local level will again reduce the pace of U.S. ad growth.”
On the national front, the big gainers will be the Internet (not including search), jumping by 16.5%, and spot TV, which he expects to show a 10% gain thanks to political campaign spending. The Big Four broadcast networks will see a 5% gain, cable will increase 6.1% and syndication will add 1%.
Newspaper spending will decline by 1%, Mr. Coen said.
GroupM also released an ad-spending forecast last week. It, too, saw ad spending increasing 3.7% in the United States.
Adam Smith, futures director for Group M, also sees the Olympics and elections as key drivers for the U.S. market.
Mr. Smith estimated that the Olympics will bring $1 billion in ad spending to national TV and $200 million-$300 million to local broadcast. The election should inject nearly $2 billion into the ad market in 2008, with much going into local broadcast, he said.
The strike by the Writers Guild of America is not expected to impact U.S. ad spending, according to GroupM. But dollars will follow viewers if they move from network to cable, and could spill over into other media if demand causes inflation in cable.
The Group M reports note a prolonged strike could delay pilots and impact the 2008 upfront marketplace.
An upfront delay would add to uncertainty and nervousness, but might force broadcasters into innovation with new formats, according to Mr. Smith.
Growth outside the U.S. will be stronger.
Led by Argentina (a growth rate of 30%), China (25%) and Russia (21%), overseas ad spending will rise 5.3% to $359.5 billion, Mr. Coen said. That produces a 4.6% increase in global spending to $653.9 billion.
GroupM sees worldwide spending rising 7%. According to Mr. Smith, Internet ad spending will exceed 10% of global ad investment for the first time in 2008. In fact, in Sweden, online advertising is expected to be the largest single medium used.
He also sees 5% of global ad investment shifting from developed countries to emerging economies, the largest shift on record.
With spending growing in markets such as China, Russia and India, “This eastward shift is a form of ‘advertising arbitrage,’ in which traditional media dollars are moving to the place where they can do the most good,” Mr. Smith said.
Of course, making predications is easy. Unless they’re about the future.

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