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AD SPENDING UP 4.5% THROUGH THIRD QUARTER

Nielsen Finds Internet Ad Spending Up 19.4%

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NEW YORK (AdAge.com) -- Nielsen Media Research and a prominent analyst offered the industry conflicting views of its health yesterday, with a a basically encouraging report from Nielsen and a downbeat update from Merrill Lynch.

U.S. ad spending for the first three quarters of the year rose to an estimated $87.3 billion, a 4.5% increase from $83.5 billion during the equivalent period in 2004, according to a Nielsen Media Research report released Dec. 1.

Internet and Spanish TV big winners, while Network TV off 3.5%.
The big gainer was, no surprise, the Internet, where ad spending increased 19.4% during the first three quarters over the first three quarters last year. That estimate would be even higher if Nielsen included search-based advertising, performance-based campaigns, advertorials and other significant chunks of online advertising.

Spanish-language television followed, with 16.7% growth.

Network TV was the biggest loser, with a 3.5% decline that partly resulted from tough comparisons with last year's commercial-laden Olympics coverage.

The overall increase may surprise those who thought that this year’s hurricanes, gas-price spikes and uneven job outlook would demonstrably sap the ad market, said Michael D. Drexler, CEO, Optimedia U.S. “With those factors influencing consumer spending and ad spending, it’s surprising to see this kind of increase,” he said.

The Nielsen report came out on the same day that Merrill Lynch issued its latest update on the industry, a considerably less encouraging document.

Merrill analyst Lauren Rich Fine lowered her U.S. advertising forecasts again. She said she now anticipates 3.2% growth in 2005, which she had earlier pegged for 3.7%, and 4.5% growth in 2006, down from an earlier estimate of 5.2%.

Among her reasons, Ms. Fine cited changed corporate attitudes and the impact of evolving technology. “Along with corporations’ cautious attitudes towards ad spending in an uncertain environment, we think the emergence of the Internet and other newer forms of marketing is allowing advertisers’ dollars to work harder with more measurability,” she said. “This greater efficiency has capped the ability of traditional media companies to raise ad rates.”

Nielsen’s report also said that the top 10 advertisers had increased spending 1.8% on the whole in the first three quarters. General Motors led that list, spending $2.5 billion for an increase of 7.3% and continuing to lead uber-advertiser Procter & Gamble, which has shifted much of its spending into some of the forms of marketing not tracked by Nielsen.

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