|
|
|
encouraging words
Weak first half leading into a very strong second
Over the past several years, it has become commonplace for media forecasters to ratchet down prior predictions for ad spending. Like the general economy, the ad economy has seemed to resist recovery.
So it was hardly a surprise yesterday when Universal McCann's respected forecaster, Robert Coen, knocked down his ad spending forecasts for 2003, based on a first half that came in weaker than expected, largely because of the war in Iraq.
But behind Coen's revision was some very good news for both media buyers and sellers. It is this: The second half of 2003 promises to see a major kickup in ad spending, leading into 2004, which Coen believes will see ad spending in the U.S. grow by 6.5 percent.
In talking to Media Life yesterday afternoon, following the presentation of his semi-annual forecast, Coen was reluctant to put numbers to growth for the second half of 2003. Nor would he put numbers to the underperformance of the first half.
But he made clear that the second half will bring marked improvement -- as indeed it must if Coen's revised full-year estimate of 4.6 percent growth is to be borne out.
"By the end of this year we expect advertising spending by both national and local marketers to be considerably more robust than in recent months," writes Coen in the report.
National advertising will grow at a somewhat faster pace than local advertising this year, with national spending swelling 5.2 percent to $153.1 billion while local spending climbs 3.5 percent to $94.7 billion.
The lower rate of growth in local advertising is largely reflective of a continuing slump in classified ads, especially job listings, says Coen.
"The help wanted portion of classifieds has been in the dumps for awhile now," he tells Media Life.
Meanwhile, retail, another big component of local advertising, took a significant hit as advertisers put spending on hold during the Iraq war.
"With retail, they can turn it on and off pretty fast, whereas in the case of national advertising there's a little more lead time involved," says Coen.
He believes the revitalized ad economy will carry over to 2004, when he predicts that U.S. ad spending will grow by 6.5 percent for the year, to $263.8 billion.
Overseas ad spending will grow 4 percent this year, a bit less than the 4.7 percent gain Coen initially foresaw.
In 2004, he predicts overseas ad spending will pick up the pace, growing 4.5 percent, with total worldwide advertising (including the U.S.) reaching $495.9 billion next year, a 5.6 percent increase from 2003.
After major cutbacks by marketers in a number of key industries in 2001, the ad economy actually experienced a significant degree of recovery last year, says Coen. It was helped along by the Winter Olympics and by political advertising linked to the 2002 elections.
By the end of the year, however, a slowdown in the overall economy, compounded by worries over the stock market and the prospect of war, had resulted in a reduction of demand for advertising.
First quarter revenues were up strongly, however, for cable, syndication, magazines and direct mail.
In a quite encouraging sign, six of the seven top-spending ad categories -- automobiles, food, movies, toiletries/cosmetics, drugs/remedies and restaurants -- were up in the first quarter of this year versus the same period in 2002.
The only category that was down was beverages/snacks, which suffered in comparison with last year because of the Olympics, which attracted heavy sponsorship from snack and beverage makers.
Still, the combined spending of advertisers in the top seven categories, which together account for more than 50 percent of all ad spending, was up 10 percent over last year, bringing budgets back to their pre-recession level, says Coen.
The picture changes when looking at the second tier of advertisers. Only two of the next seven biggest categories, computers and apparel, showed increases in the first quarter versus 2002. The other five -- telecommunications, beer & wines, resorts/tours, airlines and insurance -- were down, with airlines falling the most, by 26 percent.
Overall, spending by this group of categories was down 4 percent in the first quarter of 2003.
Coen speculates that the difference in growth between first-tier and second-tier categories has to do in part with the companies involved. First-tier advertisers such as automakers and packaged-goods conglomerates tend to be established companies that have weathered previous recessions.
"I think of them as being somewhat more sophisticated," he says. "They realize that advertising is a basic necessity in business."
Additionally, several of the second-tier industries, especially telecommunications and airlines, are weathering crises of their own unrelated to the condition of the economy.
Coen says it was the second-tier ad categories, which collectively account for 15 to 25 percent of all spending, that fueled much of the late-'90s ad boom.
"When ad demand picks up in these categories the advertising trends should really turn up sharply," reads his report.
Meanwhile, advertisers in smaller categories still stand to have an impact on the overall recovery in the next year and a half.
Financial services providers, in particular, are certain to increase their budgets if the stock market continues to improve. Spending by brokers/mutual funds was down 44 percent in the first quarter versus last year, and banks/savings & loans spent 10 percent less.
Another category on the verge of rebound is dot.coms. Despite an 11 percent decline in spending in the first quarter of 2003, the dot.com sector actually turned the corner during that period.
"[F]rom here on out in 2003 we can probably expect these new and now established dot.com marketers to spend at a rising rate for advertising messages in the traditional media," writes Coen.
|
OUTLOOK FOR
2003 |
||
| Medium | %
change over 2002 |
2003
projections $(000,000) |
| Four TV Networks | + 4.0 | $15,600 |
| Spot TV | - 1.0 | 10,811 |
| Cable TV | + 10.0 | 13,275 |
| Syndication TV | + 8.0 | 3,276 |
| Radio | + 4.2 | 4,288 |
| Magazines | + 7.0 | 11,765 |
| Newspapers | + 5.5 | 7,180 |
| CONSUMER MEDIA SUB-TOTAL | + 5.2 | 66,195 |
| Direct Mail | + 6.5 | 49,061 |
| Yellow Pages | + 1.5 | 2,118 |
| Internet | + 5.0 | 5,127 |
| Other National Media | + 3.8 | 30,563 |
| TOTAL NATIONAL | + 5.2 | $153,064 |
| Source:
Universal McCann
|
||
|
OUTLOOK FOR
2003 |
||
|
Media |
%
Change Over 2002 |
2003
projections $(000,000) |
| Local Newspapers | + 3.5 |
$38,528 |
| Local TV | +2.5 |
13,442 |
| Local Radio | +4.0 |
15,352 |
| Local Yellow Pages | + 1.5 | 11,864 |
Other Local Media |
+ 5.6 |
15,476 |
| TOTAL LOCAL | +3.5 | 94,662 |
|
Source: Universal McCann |
||
June 18, 2003© 2003 Media Life
Click
here to add the Media Life home page to your favorites!
Printer-Friendly
Version | Send
to a Friend
Cover Page | Contact
Us