"In recent years national advertisers have maintained very tight reins on their advertising budgets," Robert J. Coen, senior VP-director of forecasting at Universal McCann, said in a report released this morning at the annual UBS Media and Communications Conference. "The desire for growing corporate profits has intensified and marketers have fiercely opposed above-average media price increases. Many marketers insist on an immediate return on ad investments before approving additional advertising spending."
Failing to match GDP
In 2007, U.S. advertising failed to come close to matching nominal growth of the gross domestic product, which was up 4.8%, Mr. Coen said in his report. "The relative importance of advertising has slid again with advertising as a percentage of GDP dropping from 2.14% in 2006 to 2.05% in 2007."
The outlook this year is brightest on the national level, where ad spending was estimated to expand 3.1% while local ad spending drops 3.5%. "The role of traditional advertising shrunk considerably for local retailers and the smaller entrepreneurs operating in a single local market," Mr. Coen wrote. "The combination of practically flat local marketers' increases and the meager gains in spending by the larger marketers operating across the entire nation has resulted in very slow growth in U.S. advertising in 2007."
No bright skies expected
So, any chance for better luck next year? Mr. Coen predicted a 3.7% gain in U.S. advertising in 2008, although he cautioned not to get used to even that level of expansion, which is still modest when inflation is factored in. The Super Bowl is likely to collect even more revenue than last year, but the rest of the expected increase depends heavily on the presidential election and the Olympics.
"We expect U.S. advertising to experience improved growth in 2008 mainly because of the unique events that will fuel extra spending in 2008," Mr. Coen said, "but will not continue into 2009."