To be sure, U.S. ad spending this year will reach a record $285 billion, estimates Robert J. Coen, senior VP-forecasting at Interpublic Group of Cos.' Universal McCann.
But factor in inflation, and spending remains below its peak in the 2000 bubble ($290 billion).
More troubling for media sellers (and good news for buyers), media have largely lost the ability to get easy growth by passing along rate hikes well above the level of inflation.
Since 2001, ad spending has grown more slowly than the economy (as measured by nominal-preinflation-gross domestic product) every year except 2004, according to an Advertising Age analysis. That's a turnabout from recent decades, when ad spending grew faster than nominal GDP in most years except during recessions.
In an October report, Merrill Lynch advertising analyst Lauren Rich Fine said advertising growth now seems to be tracking real, or after-inflation, GDP growth. "This supports our belief," Ms. Fine wrote, "that media no longer enjoys the benefit of above-average rate inflation, rather the opposite, where increased competition and measurement is putting pressure on rates."
Slow growth in spending has another implication: Advertising's share of the economy is shrinking. U.S. ad spending in 2005 accounted for 2.18% of GDP, and Mr. Coen expects that to fall this year to 2.16%, lowest since 1993.
Given weak revenue prospects, media companies see little choice but to cut costs. It's little surprise, then, that U.S. media employment is 14% below its 2000 peak -- and down 6% from when the supposed ad recovery began in May 2002, according to Ad Age's review of government employment figures.
Advertising Age's ad-spending analysis, based on Mr. Coen's archive of spending estimates, shows how the media mix has changed over the decades as new media-radio, TV, internet-have taken hold.
For example, newspapers' share of U.S. ad spending fell from 44% in 1935 to 35% in 1946 as radio grew as a national medium. Ad Age's analysis based on Mr. Coen's 2006 estimate shows newspapers this year will account for a record-low 16.7% of ad spending, leaving newspapers a distant second to TV in share of media spending. Newspapers were the largest ad medium until 1994.
Market shares for radio, magazines and outdoor advertising all peaked in the mid-'40s, on the eve of TV.
Now the internet is ascending, and TV is losing share. TV's market share peaked in 2004 at just over one-fourth of ad spending. Mr. Coen's projections suggest TV will account for 23.2% of ad spending this year.
The internet's share this year, based on Mr. Coen's spending forecast, will be just 3.3% or $9.3 billion. That's a low figure, mainly reflecting that he doesn't include paid search. Mr. Coen's U.S. internet '06 ad projection -- $9.3 billion -- is below that of market watchers such as eMarketer, which predicts $15.9 billion in spending, and Publicis Groupe's ZenithOptimedia, which estimates U.S. internet ad spending this year at $12.5 billion (7.1% of major media spending and 4.6% of total media, direct and other ad spending).
Traditional media, of course, are vying for their share of new-media revenue. That's not a new idea; 48 newspapers owned radio stations in the mid-'20s, according to a 1999 analysis by the Freedom Forum, and radio-network powers NBC and CBS pioneered and long dominated TV. The internet will snare an increasing share of ad spending, but old media at least will pocket some new money.
Most ad spending still is tied to slow-growing old media. A tepid expansion beats the alternative: recession.
December marks the 61st month of this economic expansion. Average length of time during the past 50 years before expansions have given way to recessions: 61 months.