Citing an economic slowdown, a slump in tech spending, higher oil prices and other factors, several research firms lowered their ad spending forecasts.
Merrill Lynch last month changed its global ad forecast this year from 4.9% growth to 4.3% and, for 2007, from 4.1% growth down to 3.5%. For the U.S., Merrill Lynch lowered its ad forecast for this year from 5.1% to 4.7% growth, and from 3.5% growth down to 2.8% for 2007.
"Advertising growth seems to be tracking real GDP growth instead of nominal GDP growth, as it did in the past," Merrill Lynch lead analyst Lauren Rich Fine wrote in the report.
"This supports our belief that media no longer enjoys the benefit of above-average rate inflation; rather, the opposite, where increased competition and measurement are putting pressure on rates."
She also noted that slower 2007 growth forecasts reflect a projected economic slowdown and the absence of the Olympic Games and elections.
Merrill Lynch lowered its newspaper ad forecast from 1.2% to flat growth this year and, in 2007, from 1.1% growth to a 1.5% decline. It also lowered its cable forecasts from growth of 6% to 5.8% this year, and from 7.2% to 5.8% in 2007.
Merrill Lynch did not revise its magazine ad forecast this year-2.5% growth-but it lowered its forecast for 2007 from 2.0% to 1.0%.
One bright spot is online spending. Merrill Lynch raised its projection for Internet ad spending to 29.4% growth this year, from 29.1%, and to 21.9% growth in 2007, from 21.6%.
"There has been a fairly dramatic change in the whole structure of marketing and marketing spending as people move to online," said Carl Howe, principal at Blackfriars Communications, a marketing consulting and research firm.
Blackfriars last month released a report that projects U.S. businesses will spend $615.00 billion on marketing this year, down 37% from $977.00 billion last year.
The report was based on online surveys of 317 business executives, including 128 b-to-b marketers, between Aug. 3 and Sept. 19.
Also significant, Blackfriars found marketing spending fell from 8.9% of revenue last year to a projected 4.7% this year.
"Marketing has struggled because of bad weather and higher fuel prices over the last 12 months," Howe said. "Overall, companies are spending less on marketing."
They are also spending less on advertising.
Blackfriars projects that U.S. businesses will spend $217.50 billion on advertising this year, down 4.6% from $228.00 billion last year.
This year, U.S. businesses will spend $179.50 billion on offline advertising, 29% of their total marketing budgets, and $38.00 billion on online advertising, 7% of their total marketing budgets, according to Blackfriars.
Last year, Blackfriars did not break out offline and online advertising separately.
While total ad spending will be down this year, marketers are allocating a bigger piece of their marketing pie to advertising-roughly 36%, compared with about 23% last year.
Spending on direct mail and telemarketing will total $74.40 billion this year, about 12% of total marketing budgets, and spending on events will total $76.90 billion, also about 12% of total marketing budgets.
Marketers will spend $35.70 billion on Web site development and Internet media and $16.70 billion on e-mail.
In sum, marketers will spend $90.40 billion on online marketing activities, about 16% of total budgets.
In another research report released last month, JMP Securities downgraded its rating of CNET Networks' stock from a "market outperform" to a "market underperform," citing concerns about a slump in tech ad spending.
"We have become increasingly concerned about the health of the overall tech advertising market," the report stated.
JMP cited figures from the Interactive Advertising Bureau, which found tech online spending was down 10% year-to-date from last year.
The research company also said Intel Corp.'s shift away from co-op advertising (the "Intel Inside" program, which the company announced earlier this year would be replaced with a broader platform) could hurt tech advertising overall.
"Our research suggests that the new Intel strategy could account for the loss of $75 million to $100 million in technology advertising revenue next year," JMP said in the report.