Coen Lowers Ad Outlook for 2006

At Mid-Year, Believes Advertisers Are Still Risk-Averse

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NEW YORK (AdAge.com) -- Ad-spending optimists, 2006 is not your year. Robert Coen, forecasting guru at Universal McCann, sees "some signs" of a return to more normal trends, a reappearance of a really strong expansion is "still some time away."
Robert Coen
Robert Coen

Speaking to a group of analysts and reporters this morning, Mr. Coen, who joined the Interpublic Group of Cos. media agency nearly 60 years ago and is known for his hands-on, gumshoe approach to sussing out trends in advertisers' spending, presented a midyear update on ad spending for 2006.

Following an essentially flat 2005, when ad spending rose only 2.8% over the prior year, Mr. Coen said he'd expected last December that spending this year would increase 5.8%. Today, however, he lowered that slightly to 5.6%. "The cautiousness and climate of risk-aversion ... settled in earlier in 2005, and much of it could persist for some time," he said.

Games, Super Bowl buoyed first quarter
First-quarter ad expenditures revealed an improvement for the four major TV networks, up 13.3%, mainly due to the Winter Olympics and strong demand for Super Bowl ads. Gains for TV networks should "moderate" as the year continues, said Mr. Coen, who is keeping his forecast of a 6.5% gain for the year unchanged. He also expects the forecast of an 8.5% gain in national spot TV will be on the mark, or perhaps a bit stronger than predicted in December.

Cable's first-quarter ad sales showed a surprising negative slide -- up only 1.4% -- after two years of good growth, gained largely by charging higher prices. "Buyer resistance" to higher prices, said Mr. Coen, may partly explain why cable is growing more slowly than expected. Another reason: shifting dollars to internet programs in some industries. For those reasons, Mr. Coen revised his cable expectation downward from 7.5% to 4.5% growth.

Total national spending will increase by 7.1% in 2006 -- a bit higher than the latest 6.5% forecasted growth for nominal gross domestic product forecast for this year.

However, Mr. Coen cautioned that the "fact that national budget growth will slightly outpace the expected growth in the total economy is no reason for concluding that total advertising demand is booming. Relatively slow ad growth continues to be expected from local marketers."
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