The year has gotten off to a Jekyll-and-Hyde start as far as advertising is concerned. On the one hand, online advertising continues to grow at an unbelievable pace, political advertising may set a single-year record, and Spanish-language advertising remains red-hot. On the other, a soft cable market and down upfront for the broadcast networks has made some people nervous, as have minimal gains for magazines, a cut in ad spending by domestic carmakers, and even the brewing tensions in the Middle East and North Korea. TNS Media Intelligence recently lowered its forecast for 2006 ad spending growth from 5.4 percent to 4.9 percent, attributing the cut to lower-than-expected spending on newspapers, magazines and radio. For newspapers, the forecaster cut its projection from 4.3 percent growth to just 0.2 percent. Yet at the same time, it upped its forecast for spot TV from 7 percent to 8.9 percent. Thus the question still remains: Will this be a good year for advertising? The answer may simply depend on which medium you look at. Jon Swallen, senior vice president of research at TNS Media Intelligence, talks to Media Life about why newspapers will stay flat, why Detroit cut its spending, and why a weak upfront doesn’t necessarily spell trouble.

 
Overall, is this a healthy year for ad growth? Why or why not?
 
For 2006, TNS Media Intelligence is forecasting that total measured ad spend will increase by 4.9 percent. We characterize this as a moderate rate of growth, when viewed against long-term averages.

The Olympic bump is already in the books and political spending will provide another spike as election day draws nearer. Media performance will be sharply delineated along sector lines with internet, Spanish language media and television turning in above-average growth rates. Radio and print media will underperform.
 
The upfront TV market for the 2006-07 broadcast season has attracted a lot of attention. Of course, its potential direct impact on 2006 ad spending is limited to the fourth quarter. But history has also shown that the upfront market is not a reliable predictor of future TV ad spending. The rate of change in upfront bookings doesn’t automatically carry through to rates of change in actual TV spending.

According to the Internet Advertising Bureau, the pace of online advertising during first quarter outdid even the most optimistic forecasts. Do you expect it to keep growing at that pace for the entire year?
 
TNS Media Intelligence measures internet display advertising only, whereas the IAB reports on all internet advertising, including the rapidly expanding sector of search ads. We’re projecting that internet display will post 13 percent revenue growth in 2006. This comes on the heels of [a] 13.3 percent gain in 2005 and 19.4 percent in [the first quarter of] 2006.
 

TNS cut its outlook for newspapers dramatically. Why?
 
Entering 2006, we expected to see newspaper ad spend reductions by telecom companies and department stores in the wake of recent merger activity. These have occurred as anticipated. What we didn’t correctly foresee was the pace and magnitude of spending cutbacks by the auto category, especially local dealerships.

The expectation of continued weakness in auto spending contributed to our downward revision. Our current forecast is for 2006 newspaper revenue to be flat versus last year.

 
How much is Detroit’s cutback in spending hurting advertising growth overall? Which areas are most affected?
 
Through May, domestic auto spending by factories and dealers is down about 16 percent from last year and import spending is down about 4 percent. Auto represents about 12 percent of total ad spend, so when 12 percent of the market is down by a combined 10 percent, the impact is noticeable.
 
The erosion in domestic auto spending has hit print media much harder than electronic media. But all parties are sharing the pain.
 

Were you surprised at what looks like softer demand for cable this year, with the upfront off to a slow start in a category that has been showing strong growth for several years?
 
Cable’s quarterly growth rates have been easing since the end of 2004, so in that respect the current cable upfront market appears to be an extension of this trend.

The softening demand for cable is reflected in two key statistics. First, the volume of paid ad time has been flattening. Second, the CPM gap between cable and broadcast networks has stalled, i.e., cable is not closing the gap as it had been previously.
 

Spanish-language media has also been a hot category. How long can it continue at this pace, and what factors will eventually lead it to flatten out?
 
Spanish language media is dominated by network TV, which accounts for about 60 percent of sector ad spend. Spanish network TV spending has fluctuated in recent years with periods of rapid growth followed by periods of flattening.

Since September 2005,the beginning of the broadcast year cycle, ad spending on the Spanish-language networks has surged, posting double-digit year-over-year gains each month. The primary driver has been increases in paid ad time. External indicators point to World Cup packaging and growth in audience ratings as key contributors to the higher demand.
 
When the calendar rolls around to September 2006, the Spanish networks will enter a period where comparisons become more difficult to match.

Longer term, sustained growth in Spanish-language media spending will be dependent on advertisers’ strategies for reaching an increasingly acculturated Hispanic population.

 
Political spending is expected to surpass 2004’s record presidential year. Will we see this sort of growth for politicals from here on? Is this a category that will grow indefinitely?
 
In the long run, campaign finance laws will have a major role in determining the size of this category. Given the current legislative climate, we expect political ad spending to be very healthy for at least the next four to six years. But as in the recent past, spending will be geographically concentrated, depending on where the competitive races are occurring.
 

Is there any category of ad spending that has been particularly hard to forecast this year? Why?
 
Retail ad spending. While retail sales have been holding steady, ad spending by retailers has been unsteady.

One hypothesis it that it’s a case of early belt tightening in anticipation of reduced consumer spending due to higher energy prices, higher interest rates and a cooling housing market.