McCann Revises 2005 Adspend Estimates

“There’s every sign that marketers and their management are sitting on their hands and holding their money pretty close to their chest. Something that was expected in terms of expanded spending didn’t take place.”

Coen attributes the revisions to various factors, saying: “You can speculate all over the place as to why the industry isn’t performing as well as expected.”

He continued: “I think some of the regulations we have got here have got management checking out everything before they do anything, their stock prices are still lingering below where they were a few years ago, and so they’re probably desperately trying to get their stock holders happy by boosting profits and thus are reluctant to spend.”

Coen added: “There’s also been a bio resistance, high media prices, all these things seem to have hit in the last six to nine months, although with hindsight you can see that there was bio resistance growing. That’s my only alibi!”

Total US adspend for 2005 is now expected to be up by 5.7% year on year in 2005, reaching $278.7 billion, down from Coen’s previous estimate of 6.4% released in December (see Universal McCann Predicts Positive Outlook For 2005).

National advertising expenditure is predicted to rise by 6.5% for the same period, totalling $177.9 billion, compared to earlier forecasts of 7.4%.

Local adspend forecasts were revised only slightly, with the new estimates projecting a 4.3% year on year increase, down from 4.8%.

Reports for overseas markets are mixed compared to Coen’s December 2004 indications, with a number of European countries reporting worsening conditions. The UK’s adspend is predicted to rise by 4.7% in 2005, compared to 2004.

However, the outlooks for several foreign markets are now better than in previous months ago, with Latin America predicting improved performance and Brazil expecting significantly better advertising growth.

The advertising outlook for Japan, meanwhile, is revealed to be weak. The rest of the Asia-Pacific region is forecast to perform well in 2005, with China, Indonesia and India expecting double-digit gains in 2005.

Mail advertising in the US is expected to continue growing, as marketers search for alternatives to their former telemarketing programs. National spot advertising is predicted to decline far more dramatically in 2005 than previously expected, while cable TV networks are performing better than predicted at the beginning of the year.

Overall, the stronger pace of ad growth this year has stalled, with Coen forecasting ad growth to achieve the level of nominal GDP.

Projections for 2006, however, are much more optimistic, with Coen expecting advertising in the US to match or outpace GDP growth.

Explaining his reasons for a more upbeat market in 2006, Coen told INSIGHT: “I think we’re in a cautious hold, wait and see type of pattern that has been going on longer than it should. The main reason why I’m talking myself into more optimism is – it’s going to end soon. It can’t rain forever!”.

TNS Media Intelligence has predicted advertising expenditure in the US to reach $145.3 billion in 2005, up 3.4% year on year; but not quite the impressive growth of 9.8% enjoyed by the industry in 2004 (see TNS Predicts Muted Adspend Growth In 2005).

TNS’s estimates are more optimistic than those of analyst Merrill Lynch, which recently revised its forecasts for US adspend in 2005 down to 4.5% from the previously expected 4.8% (see Merrill Revises 2005 Ad Growth Forecasts Downwards).

An initial forecast by the analyst for 2006 puts US ad growth at 5.5%, while globally the sector is expected to rise by 5.6%.