B-to-b ad spending trails overall growth

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In 2003, b-to-b print ad spending lagged overall ad spending, which grew 6.1% to $128.3 billion, according to a report released last month by TNS Media Intelligence/CMR.

Ad spending in b-to-b publications in 2003, by comparison, grew by only 0.7%, to $7.28 billion, according to the Business Information Network, a joint report by American Business Media and TNS, also released last month.

B-to-b ad spending fell short of the 3% to 4% growth projected early in 2003 by ABM President-CEO Gordon Hughes.

Disappointing fourth quarter

Hughes said the shortfall was due to a disappointing fourth quarter, which was up only 2.5% over the fourth quarter of 2002.

"We had thought the fourth quarter of ‘03 would have been a little stronger," Hughes said. "It just wasn’t enough to bring the full year up to 3%."

He blamed the weak growth on the technology industry, which had been projected to bounce back in the fourth quarter.

In December, print ad spending in the computer industry was down 35.1% from December 2002, and spending in software was down 13.4%. Other industries that were hit hard in December were manufacturing and electrical equipment, materials and components (down 16.3%); travel (down 7.7%); and automotive (down 2.6%).

B-to-b industries that did well in December were retail (up 25.3%); finance, business and advertising (up 20.5%); drugs and toiletries (up 15.1%); services, direct response and classifieds (up 14.3%); horticulture and farming (up 9.7%); home and building (up 9.3%); and telecommunications (up 1.8%).

The overall ad industry did better than expected for the year. TNS/CMR had forecast overall growth of 4.3% earlier in the year, and the total came in at 6.1%.

In 2001, b-to-b ad spending fell 22% from the previous year, and in 2002 spending was down 14%. For 2004, Hughes projects growth of 2% to 4%.

However, he added, "If it doesn’t happen in the second quarter, it probably won’t happen." He said ad spending in the second quarter has to be up at least 4% in order for the year to come in at his projection.

Unexpected GDP growth

George Shabbab, senior VP-strategic development at TNS, said last year’s overall ad industry increase was due in large part to stronger-than-expected growth in the gross domestic product (GDP) in the third quarter, up 8.2%.

"That was a GDP growth level we did not expect," Shabbab said, pointing out that the TNS model is a macro-economic one that is affected by the overall economy.

The Internet showed the most robust year-over-year gain for 2003, posting a 15.7% increase to reach $6.4 billion in ad spending, according to TNS.

Other media with strong growth in 2003 were cable TV, which increased 15.6% to $12.2 billion in ad sales; Spanish-language network TV, which grew 12.8% to $2.1 billion; and syndication, which increased 15.3% to $3.3 billion.

Local newspapers led in total ad spending for 2003, posting $22.7 billion in ad sales, up 13.4% over 2002, the report found.

Procter & Gamble Co. was the leading ad spender, posting a 24.7% increase to $2.6 billion. Other leading spenders include General Motors Corp. ($2.4 billion), Time Warner ($1.8 billion) and Walt Disney Co. ($1.2 billion).

Shabbab said total ad spending in 2004 is expected to be up 7.8%.

"Spot TV will benefit from the upcoming elections, and the Internet we believe will continue to grow as we see more traditional blue-chip advertising using the medium," Shabbab added.

Other trends that will contribute to Internet ad growth this year include the continued growth of broadband penetration and the introduction of new online ad formats, in particular rich media, he said.

"I do think the rich-media capability is a critical driver in advertiser acceptance [of Internet advertising]," he said.

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