An advertising recovery is ‘brewing’ but is ‘percolating’ slowly, according to Lauren Rich Fine, an advertising and publishing analyst with Merrill Lynch.
As such, it is raising the US ad forecast to a gain of 0.4% this year, followed by 4.0% to 4.5% growth next year. Globally, Merrill forecasts a 1.2% decline this year, followed by 4.0% to 4.5% growth in 2003.
Previous forecasts predicted that US ad expenditures would decline 1.5% in 2002 and grow 4.0% in 2003; globally a 2.1% decline followed by 4.0% growth had been expected.
Advertising growth forecasts (%) | ||||
2002 | 2003 | |||
Previous | New | Previous | New | |
US | -1.5 | 0.4 | 4.0 | 4.0-4.5 |
Global | 2.1 | 1.2 | 4.0 | 4.0-4.5 |
Source: Merrill Lynch, May 2002 |
Merrill says that this recovery will be different from previous ones, as it is based on corporate profitability rather than consumer thrift and confidence.
US upfronts The broker says that the results from the broadcast and cable TV upfront markets should offer a better sense of what the total year will look like from a spending perspective. At this point, Merrill Lynch media analysts are forecasting a 2% to 6% increase in upfront dollars committed, as advertisers seem to have budgets to spend, particularly if they are able to negotiate attractive deals.
Media companies ahead of agencies Many media companies continue to post ad revenue gains or are close to a positive turn. The ad agencies, however, are lagging, as is typically the case accordingly to analysts; it will take a heightened level of corporate confidence to start ordering new ads or to launch new products that require new ad campaigns, says the report.