Ad spending to grow in 2006

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Total ad spending in the U.S. is expected to reach $152.30 billion this year, up 5.4% over 2005, according to a January forecast by TNS Media Intelligence.

The increase follows ad growth of 3.0% in 2005 over 2004, according to TNS.

TNS projects ad growth of 5.0% during the first half of the year and growth of 5.7% during the second half.

Steven Fredericks, president-CEO of TNS, said ad growth will be driven by several factors this year.

"There are three events in 2006 that are unique-the Winter Olympics, the World Cup and a rather remarkable increase in political ad spending due to many more elections," Fredericks said.

He said the Winter Olympics, which began Feb. 10 and will continue through Feb. 26, are expected to generate about $450 million in advertising.

The FIFA World Cup, which will be held in Germany this June, is expected to bring in between $180 million and $200 million worth of advertising, Fredericks said.

And political ad spending will generate about $1.20 billion in advertising this year due to races including high-profile gubernatorial elections in California, Florida New York and Texas, and more than 50 congressional races.

Hispanic network TV growth

Within media categories, the strongest growth will be in Hispanic network television, which will increase by an estimated 10.4% over 2005 spending, according to TNS.

Internet ad spending is projected to increase by 9.1% this year over 2005, and cable TV spending will increase by an estimated 8.4%.

"All categories will show an increase in 2006," Fredericks said.

"The market is becoming compressed," he added. "The swings between the lowest and highest [growth rates] are about 1% to 10% increases, not 40%. There is an indication of consistency."

In terms of share, TV advertising will make up 43.7% of total measured ad spending in 2006, followed by magazines (20.5%), newspapers (19.9%), radio (7.5%), Internet (6.0%) and outdoor (2.4%).

TNS currently does not include search advertising in its Internet ad spending projections, although it is working on a plan to add it to its methodology, Fredericks said.

Other recent online ad spending projections by research companies point to a more significant increase in online ad spending this year.

Piper Jaffray & Co., an investment bank and research firm, released a report last month projecting a 24% increase in online ad spending, led by search companies including Google and Yahoo!

In its report, Piper Jaffray said several factors will drive online ad spending growth this year, including continued high demand for search advertising, more traditional brand advertisers increasing their online ad budgets and increased spending on Web development as marketers hope to drive conversion rates and develop more interactive sites.

Leading online ad categories

The leading categories for online advertising in 2006 will be automotive, finance, entertainment and health care, the report projected. Auto manufacturers are expected to increase their online ad spending by between 50% and 100%, Piper Jaffray said.

In terms of ad pricing, the highest prices are being generated by "tier 1" sites such as Yahoo! and MSN, the report found. Piper Jaffray projects online ad prices could increase by between 15% and 20% for high-demand ad inventory.

The report also found that brand advertisers are beginning to express interest in online video ads, although these ads are still in the early stages of acceptance.

Internet research company eMarketer projects that online ad spending will reach $15.60 billion this year, up 26.8% from $12.30 billion in 2005.

"The growth will be driven mainly by search," said David Hallerman, senior analyst at eMarketer.

Total search spending will be $6.90 billion, or 44.2% of total online advertising, compared with search spending of $5.20 billion in 2005, which represented 42.2% of total online advertising, he said.

Other trends driving the growth in online advertising this year are the continued strength of online classified ads, which will increase by about 17%, as well as the continued strength of display advertising, which will grow by approximately 17.5%, Hallerman said.

In 2005, online classified ads grew by approximately 17%, and display advertising grew by about 19%, he said.

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