A leading media analyst at Merrill Lynch has offered a grim prognosis for the short term future of the advertising industry, claiming that recent events have conspired to foster uncertainty rather than spread optimism.
Lauren Rich Fine says that negative earnings announcements, volatile share prices, confusing economic forecasts and the ongoing threat of war mean that advertisers are becoming ever more reluctant to up their spending.
“Bottom line, it is hard to get excited about the prospects for advertising as so many companies are in a state of paralysis,” she said. This viewpoint echoes that of fellow analyst, Neil Blackley who recently downplayed talk of a worldwide recovery (see Advertising Outlook And Background From Merrill Lynch).
Prognosis for 2003 It is intimated that the revised 2003 forecasts issued by Merrill Lynch (see Merrill Lynch Lowers 2003 US And Global Ad Forecasts) may need to be downgraded further. The growth forecast for the US has already been reduced to 4% and the global forecast is down to 3%. These predictions do not take the possibility of Middle East conflict into consideration.
Examination of individual advertising sectors provides little cause for encouragement. The technology market remains depressed and car manufacturers, traditionally heavy advertisers, have shown little inclination to increase their budget for next year.
Fine acknowledges that there are signs of growth in network TV, cable and radio advertising and the upfronts show that clients do want to increase their spending. However, newspaper ad revenues are expected to rise no more than 1% this quarter, less than previously forecasted. Only the anticipated fall in newsprint prices will enable publishers to report significant growth.
