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(May 14, 2001) -- Newspaper advertising will be flat -- or worse -- in 2001, and the Internet will continue nibbling at its classified ad revenue, according to a report from Merrill Lynch & Co.

First Vice President Lauren Rich Fine, Merrill Lynch's advertising and media analyst, revised her earlier 2001 newspaper forecast of 2.3% growth in ad revenue to a drop of 0.3% below 2000, including a 4% drop in classified revenue, a 1.5% increase in retail revenue and 4% growth in national ads.

But Ms. Fine's forecast cautions the projections still assume a second-half recovery, a scenario that is not certain, given the bleak first-quarter results reported by most newspaper companies.

A more bearish possibility -- assuming lower consumer spending as a result of higher unemployment -- calls for a 3% drop in ad revenue. That forecast would factor in an 8% to 10% decline in classified revenues, flat retail ads and only a slight uptick in national ads. -- Mercedes Cardona

Copyright May 2001, Crain Communications Inc.

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