PricewaterhouseCoopers: Ad Spending Will Grow 5.4% Annually

Online Ad Revenue Will Surpass Radio in 2009

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NEW YORK (AdAge.com) -- Ad spending in the U.S. will surge to $230 billion in 2010 from $177 billion in 2005, for a 5.4% compound annual rate of growth, according to the Global Entertainment and Media Outlook report being released today by PricewaterhouseCoopers.
While Google and Yahoo will remain king nationally, newspaper will continue to have a strong local voice, attracting readers and ad dollars.
While Google and Yahoo will remain king nationally, newspaper will continue to have a strong local voice, attracting readers and ad dollars.

And there is good news for media sectors such as magazines and newspapers, according to PwC: the web isn't gonna kill you as soon as some people think. In fact, only radio will see online ad revenue surpass its own -- and that won't happen until 2009, according to the report. Magazines, which a recent Merrill Lynch estimate said would be overtaken by the web this year, will maintain their lead through at least 2010.

White-hot growth
But the report predicts that the internet will indeed continue its white-hot growth, increasing its U.S. ad revenue to $25.5 billion in 2010 from $12.5 billion last year, for a 15.2% compound annual rate of growth. That's more than double broadcast TV's anticipated 7.1% rate and far more the second-quickest comer, outdoor, where PwC sees an 8.3% compound rate of growth.

"We've passed the critical mass point to where this is going to be a business," said David Moss, director, PricewaterhouseCoopers' entertainment and media practice. "More and more of the competition is understanding it too. My broadcast clients, all they can talk about is their internet strategy. That wasn't the case a year ago."

(Peering far around the corner, however, the report anticipates that web growth will peter off into the single-digits -- gasp! -- in 2010.)

The smallest increases will belong to newspapers, which the report estimates will increase ad revenue to $58.7 billion in 2010 from $49.4 billion in 2005 -- a 3.5% compound annual rate.

Bullish on newspapers
Mr. Moss said he was nonetheless bullish on newspapers because their local brands are so strong and their local knowledge is already acquired. "On a national basis, Google and Yahoo are king and that's just the way things are going to be," he said. "In a local-world, small-town America, you trust your local newspaper." Ad revenue that goes to newspapers' web sites, he added, is counted as part of internet totals.

Radio ad revenue is estimated to grow at 4.3%, and magazine ad revenue will grow at 4.5%, according to PwC.

As for broadcast and cable TV, PwC sees spending growing at 6.6% annually, to reach $227 billion in 2010. Digital platforms, including mobile phones, will allow for new channels, new distribution and fuel multichannel advertising, which will be the principal driver during the next five years. New analog channels, digital broadcasting and high-definition TV will increase the appeal of free-to-air channels.

On the global stage, the report anticipates global ad spending will expand at a 6.2% compound rate to $521 billion in 2010 from $385 billion last year.
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