Several research firms have recently issued reports showing decreased ad spending in the first half and have downgraded their projections for the year.
TNS Media Intelligence reported last month that U.S. ad spending totaled $72.59 billion in the first half, down 0.3% from the same period last year.
"There are still some fundamental underlying economic weaknesses, including a slowing rate of growth in corporate profits and a slowing rate of growth in consumer retail sales," said Jon Swallen, research director at TNS.
Swallen also pointed to a protracted downturn in the automotive industry, which saw a 10.8% decline in ad spending by domestic automakers, as well as continued weakness in the telecom industry, which had a 6.3% drop in ad spending in the first half.
"There are really two stories in telecom," Swallen said. "We are seeing continued strong spending from the major wireless carriers, who are all being very aggressive with their advertising."
He said spending by wireless divisions of telecom companies was up an average of 8% to 12% in the first half. "However, two significant events pulled down the overall number," he added.
AT&T, which introduced a major rebranding campaign last year following its merger with SBC Communications, decreased its ad spending by 12.5% in the first half. Also, Time Warner's AOL division announced a shift in strategy to lessen its reliance on consumer subscription fees, resulting in a 7.9% decrease in ad spending in the first half, according to TNS.
Different tiers of advertisers responded to economic conditions with varying ad spending strategies, Swallen said.
He said the top 100 advertisers, which make up roughly 45% of total ad spending, decreased ad spending by about 1% in the first half.
Advertisers ranked from 100 to 1,000, which make up about 30% of total ad spending, increased their spending by about 5%.
The remaining advertisers, which contribute roughly 25% to total ad spending, decreased ad budgets by about 5% in the first half.
"These smaller advertisers are more economically sensitive and don't have the benefit of a huge budget to ride things out," Swallen said. "These guys, by virtue of their size, react very quickly and pulled back on their advertising spend. I think they're the difference between a positive number and a negative number."
Also last month, Nielsen Co. reported that total U.S. ad spending was down 0.5% in the first half compared with the first half of last year, according to its Nielsen Monitor-Plus service.
For the top 10 companies monitored by Nielsen, ad spending totaled $8.30 billion in the first half, down 7.3% from the same period last year.
Of the top 10 U.S. advertisers, seven lowered their ad spending in the first half, with General Motors Corp., the second-largest advertiser, slashing its ad budget by 27.7% to $954 million. The top advertiser, Procter & Gamble Co., decreased its ad spending by 1.4% to $1.66 billion.
Other top advertisers that cut their ad budgets in the first half included AT&T (down 12.9%), Johnson & Johnson (down 7.0%), Time Warner (down 7.4%), Toyota Motor Corp. (down 5.2%) and Chrysler (down 4.4%).
In another ad spending report, ZenithOptimedia downgraded its U.S. ad forecast to 2.5% growth this year, reaching $187.42 billion, from an earlier projection of 3.3% growth.
"The continued slump in the U.S. housing market has led to a sharp drop in property and construction advertising, particularly property classifieds in newspapers," Zenith said in its report.
"This, and the recent credit squeeze, has led us to downgrade our forecast for growth in the U.S."
ZenithOptimedia projects that TV advertising will capture 38.2% of global ad expenditures next year, partially as a result of the 2008 Beijing Olympics.
It also revised upward its projection for Internet advertising to 29.9% growth this year (up from an earlier projection of 28.6%), with 85% growth between 2006 and 2009 (up from 82%). Online video and local search are the fastest-growing segments of online advertising, contributing to 30% growth in Internet ad spending this year, according to the report.