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Schonfeld forecasts advertising recovery

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The advertising industry is poised for a modest recovery next year, according to the 34th annual “Advertising Ratios & Budgets” report, released last month by research company Schonfeld & Associates. The report forecasts ad spending and provides estimates of ad-to-sales ratios for more than 4,600 individual companies in over 330 industry segments. The information is gathered from publicly reported documents, such as 10-K filings, and analyzed using a proprietary forecasting model. The report includes information on total advertising and promotional spending, not just measured media. “In general, we are seeing a very modest increase in ad spending,” said Carol Greenhut, president of Schonfeld. “Companies are continuing to spend [on advertising] as they anticipate the return of more consumer spending. We are seeing that in certain sectors, particularly in hardware, software and telecommunications.” The report breaks out ad spending by SIC (standard industrial classification) number. The largest ad spending category is the diversified food industry, which will spend an estimated $30.1 billion on advertising next year, up from $29.9 billion this year, according to the report. The second-largest ad spending category is the wireless communications industry, which is projected to spend an estimated $24.6 billion next year, up from $23.4 billion this year. Ad spending by telecommunications companies (excluding wireless) will total approximately $17.4 billion next year, down just a fraction from $17.6 billion this year, according to Schonfeld. “The widespread use of the Internet translates into continuing demand for high-speed access and equipment,” Greenhut said. “Spending by manufacturers of traditional cell phones lags the spending of smartphone companies, reflecting consumers' switch to the more powerful phones.” For example, Research in Motion, which makes the BlackBerry line of smartphones, is expected to raise its budget 22% next year, according to the report. The pharmaceutical industry, the third-largest advertising category, is forecast to spend an estimated $24.0 billion on ads next year, up from $22.9 billion this year. The automotive industry, which has been hard-hit by the recession, will spend approximately $18.0 billion on ads next year, down from $19.9 billion this year. Ad spending by software companies is projected to reach $6.1 billion next year, up from $5.6 billion this year, while advertising for semiconductors and related devices will total $2.4 billion, down from $2.6 billion this year. In addition to projecting ad sales, the report also provides an estimate of advertising-to-sales ratios by industry. The industry with the highest ad-to-sales ratio this year is consumer products (6.6%), followed by communications products and services (3.5%), health care (3.2%), services excluding health care (2.9%), construction and real estate (2.6%), transportation and travel (1.9%) and computers and software (1.7%). The average ad-to-sales ratio across all industries this year is 2.1%, according to the report. Schonfeld projects sales growth of 1.8% across all industries this year, and ad growth of 0.6%. M
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