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Ad spending up in '05, '06

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Ad spending is expected to grow at a moderate 3.4% rate this year over 2004, reaching a total of $145.3 billion, according to a forecast by TNS Media Intelligence.

For the first half of the year, ad spending grew an estimated 4.1%, with a 2.7% increase projected for the second half, according to TNS.

"While the projected 3.4% gain for 2005 is behind the 9.8% increase that was seen in 2004, we are encouraged to see the advertising industry continue to show growth," said Steven Fredericks, president-CEO of TNS Media Intelligence.

TNS projected an increase of just 0.7% in total ad spending for the third quarter of this year, with a 4.5% increase in the fourth quarter.

Fredericks said the slower third-quarter growth is not surprising, given increased spending in the third quarter of 2004 on the Summer Olympics and the U.S. presidential election.

"We believe that the rate of growth will improve during the fourth quarter as advertisers' confidence in the economy stabilizes and consumer spending continues to expand," Fredericks said.

The media category seeing the most growth this year will be cable TV, which is expected to rise 11.6%. Internet ad spending will grow by 7.6%, slowing down after two years of double-digit growth, TNS projects.

Other media categories expected to grow this year include Hispanic TV (up 10.5%), consumer and Sunday magazines (up 7.5%), outdoor (up 5.5%) and newspapers (up 3.8%). TNS tracks spending in approximately 700 business publications.

Spending in b-to-b magazines is projected to be down by 0.9%, TNS projects.

American Business Media, which produces the Business Information Network report with IMS/The Auditor, is more optimistic about ad spending in b-to-b publications. ABM projects ad spending will be up by 4% to 5% in 2005, reaching close to $9 billion, said Gordon Hughes II, president-CEO of ABM.

"We are right on track to meet the projection," Hughes said. "We had a weak January and February, but we had a very robust April." So far this year, ad spending is up about 4.5% over ad spending year-to-date in 2004.

ABM, which also tracks ad spending on trade shows and events, said it expects this category to be up about 6% over last year, reaching about $9 billion. "Trade shows are now equal to magazines, which is a bit of a sea change," Hughes said. Previously, trade show spending trailed magazine spending.

Electronic media booming

Spending on electronic b-to-b media, including e-newsletters, digitized magazines and online advertising, will be up about 25% this year, reaching more than $2 billion, according to ABM.

The BIN report is based on ad spending data from more than 1,600 b-to-b publications.

A separate report by Schonfeld & Associates analyzed ad spending across more than 300 industries for 2006.

That report is based on total advertising and promotional expenses by public companies as reported to the U.S. Securities & Exchange Commission.

According to the study, the top ad spending category in 2006 will be the automotive industry, which is expected to spend $33.5 billion worldwide on advertising, up 7.6% over 2005 ad spending.

Diversified food companies are expected to spend $28.3 billion worldwide in 2006, up 8.1%. Telecommunication service companies will spend more than $22.2 billion in 2006, up 5.9%.

Within the computer industry, PC manufacturers will increase ad spending by 11.7% in 2006, while software companies will increase ad spending by only 2.1%, according to the study.

Advertising for semiconductors will be up 14.8% in 2006, and spending by computer communication equipment manufacturers will increase 9.5%.

The report also provided advertising/sales ratios for various categories for 2006, which reflect ad spending as a percentage of total sales.

Health services had one of the highest ad/sales ratios for 2006, at 18.7%. Other industries with high ad/sales ratios are transportation services (14.2%), motion pictures and videotape productions (13.7%), food (11.9%), newspapers (11.1%) and broadcast television stations (10.7%).

Computer and office equipment had an ad/sales ratio of 1.2%, while computers and software wholesale had only a 0.2% ad/sales ratio.

"In 2001 and 2002, business was retrenching and buying only what it absolutely had to," said Carol Greenhut, president of Schonfeld & Associates. "Now the economy is picking up, and there are more and more channels in which to advertise."

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