Merrill Lynch Lowers 2003 US And Global Ad Forecasts
Analysts at Merrill Lynch have slightly downgraded their 2003 forecasts for US and global advertising growth, warning that further downgrades are more likely than upgrades.
The US growth forecast for 2003 has been reduced from 4.2% to 4.0% and the global forecast from 4.0% to 3.0%. The 2002 forecasts remain as 0.7% for the US and -1.2% growth globally. None of these forecasts incorporates a war scenario.
| Merrill Lynch Ad Forecast Revisions | ||||
| 2002 | 2003 | |||
| Old | New | Old | New | |
| Total US advertising | 0.7 | 0.7 | 4.0 | 4.2 |
| US exc. direct mail | 0.4 | 0.4 | 4.1 | 4.2 |
| Newspapers | -0.6 | 0.1 | 4.0 | 4.7 |
| Broadcast TV | 4.6 | 3.3 | 3.3 | 3.0 |
| TV networks | 4.0 | 4.5 | 6.0 | 5.0 |
| TV stations | 6.8 | 4.1 | 1.1 | 2.0 |
| Cable | -0.2 | -1.1 | 5.8 | 6.5 |
| Radio | 4.3 | 4.6 | 6.5 | 5.0 |
| Magazine | -3.0 | -2.0 | 4.0 | 5.0 |
| Internet | -10.0 | -15.0 | 5.0 | 5.0 |
| Non-US advertising | -2.5 | -2.6 | 2.1 | 3.9 |
| Global exc. direct mail | -1.2 | -1.3 | 3.0 | 4.0 |
| Source: Merrill Lynch, September 2002 | ||||
Merrill Lynch says that marketing executives seem to be experiencing the same uncertainty as the financial markets. Advertisers, whilst not actually cutting budgets, are hesitant to invest more than a quarter or two ahead, as return on investment is hard to predict, given that the tide of consumer sentiment is currently difficult to gauge.
On a more positive side, there is a low ratio of cancellations in the finalising of the US network television upfront deals. This means that advertisers are honouring around 95% of the deals they booked in the pre-season upfront market (see US Advertising Update From Merrill Lynch). However, Merrill Lynch notes that advertisers may have learnt that there are no real repercussions to over-committing, but that there are real penalties for under-committing.
Ad agencies are currently not experiencing any pick-up in the market, but this could be because there is usually a lag between the agencies’ experiences and that of the media. This is because old campaigns, that are already paid for, can be run first or for longer, benefiting media owners; ad agencies, on the other hand, have to wait for new campaign spend to filter through before their figure will pick-up.
Analysts at Merrill say that if the agencies do not start seeing an improvement soon, they will start getting concerned.
Analysts question other forecasts Merrill Lynch has questioned the verity of other US ad forecasts released recently by both CMR and Nielsen Monitor-Plus. Analysts say that both forecasts are too optimistic, citing their newspaper figures as an example. CMR says that local newspapers revenue rose by 6.3% in H1 (see US First Half Adspend Comes In Flat, According To CMR); Nielsen reckons the growth was higher, at 9.1% (see US Adspend Up 2.3% In H1, According To Nielsen Figures).
Merrill questions each of these figures, given that its own survey of publishers shows a decline in H1 spend, as do figures from the Newspaper Association of America (see US Newspaper Revenue Down 4.0% In First Half, Says NAA). Consequently, the broker speculates that other figures in CMR’s and Nielsen’s list may be overly-optimistic.