2 big ad firms upbeat about 2005

Growth of U.S. spending is put at 4.2% to 6.4%

December 07, 2004|By Leon Lazaroff | Leon Lazaroff,CHICAGO TRIBUNE

NEW YORK - The advertising industry appears poised for stronger-than-expected growth next year, two leading industry forecasters said yesterday.

Bob Coen, a senior vice president at Universal McCann, predicted U.S. advertising spending would rise 6.4 percent next year to $280.6 billion, while global spending can be expected to increase 6.1 percent to $553.4 billion.

Coen and Steve King, chief executive at ZenithOptimedia, made their forecasts on spending at the opening of the 32nd annual UBS Media Week Conference in Manhattan.

King was less optimistic, though, forecasting a 4.2 percent upturn in U.S. advertising spending next year to $174.8 billion, and a 5 percent increase in worldwide ad spending to $388.3 billion.

The forecast is one of the most upbeat since the burst of the dot-com bubble sent the industry into its worst recession since the Great Depression.

The industry appeared to turn the corner in 2004, thanks in large part to the Summer Olympics and political advertising. Next year, Coen said, the industry should return to "steady and solid growth."

For 2004, Coen said, advertising would rise 7.4 percent over 2003 to finish at $263.7 billion. That's slightly higher than the 6.9 percent he predicted a year ago.

"The year is ending up slightly better than we expected," he said.

The prediction for local advertising isn't as bright, with Coen forecasting a rise of 4.8 percent next year.

King said that U.S. advertising would grow 6 percent for 2004 and that worldwide spending this year would increase 6.9 percent. ZenithOptimedia, a media services operation owned by Publicis Groupe SA, estimates that U.S. advertising makes up about 45 percent of worldwide ad spending.

Advertising spending in 2004 outpaced economic growth. Historically, Coen said, an advertising recovery lags behind a strengthening economy. In 2005, Coen added, the economy "will moderate but the advertising recovery should continue."

On Madison Avenue, the forecasts were greeted with guarded enthusiasm. Too often in recent years, said Steve Farella, president and CEO of TargetCast TCM, an independent media agency based in New York, predictions for a recovery were clouded by the intense yearnings for one to occur.

"We've lived through a lot of forecasts that were robust because we wanted them to be," Farella said. "This time, I think they're being accurate because it is being felt in the marketplace."

The year was not without its challenges, Coen added. The war in Iraq coupled with a general uncertainty about the strength of the economic recovery produced cautiousness on the part of some advertisers, especially those at the local level. While spending for national advertising was up 8.9 percent, local advertising grew 5.1 percent.

Across the various mediums, television was the biggest beneficiary of the Olympic and political spending increase, though Internet advertising grew more rapidly than any other category at 25 percent, reported Universal McCann, a leading media agency that is part of the Interpublic Group of Companies.

Coen said it is likely that local retailers that use outdoor advertising would switch to Internet sites.

Though the four main broadcast networks saw ad spending increase 9.5 percent on their networks, growth in cable-TV advertising outpaced broadcast. Advertising spending on cable TV is expected to increase 12 percent in 2004 to $15.6 billion, compared with $16.5 billion spent through the four networks.

Newspaper ad spending increased 5.5 percent in 2004 compared with 2003, while magazine spending increased 6 percent.

Pharmaceutical companies topped the list of industries that increased their budgets the most this past year. According to Coen, pharmaceutical advertising increased 21 percent.

They were followed by the beverage and automobile industries, which raised spending 11 percent and 10 percent, respectively.

The Chicago Tribune is a Tribune Publishing newspaper.

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