COEN: AD SPENDING TOPS $175 BILLION DURING ROBUST '96: BUT MCCANN EXEC SEES MUCH MORE MODEST GROWTH IN '97

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From 1987 to 1990, U.S. advertising grew slower than the U.S. economy. Then, in the recession year of 1991, advertising suffered its worst decline in half a century.

Despite the fact the economy began to recover the next year, it wasn't until 1994 that a clear and significant re-expansion in U.S. advertising made an appearance. And what a recovery: In 1994, 1995 and 1996, U.S. advertising began to grow significantly faster than the economy.

The year 1996 was an excellent one for the industry, as total expenditures reached $175.2 billion, a gain of more than $12 billion over the prior year's level.

Advertising's relative importance increased to close to the levels of the recent past. As a percent of gross domestic product, advertising is back to where it was in the mid-1980s. There is no evidence other marketing practices have replaced advertising's role despite a decade of rhetoric announcing such developments.

Nevertheless, the relatively strong rate of expansion in ad spending shows signs of moderating in 1997-coming closer in line with growth of the total economy.

OUTLOOK FOR '97

Advertising expanded at a much faster pace than the economy last year but demand and prices were uniquely stimulated by the summer Olympics, which had not been held in the U.S. for more than a decade.

The presidential election combined with races for the House and Senate added a great deal of ad demand, which put pressure on prices and time for non-network broadcast commercial slots.

Without these two extra spikes in demand, advertising expenditure growth in 1996 would have been lower than the 7.5% we tally-though undoubtedly still higher than the 4.4% growth in GDP.

However, the core rate of ad growth-with the Olympics and election removed-moderated compared with 1994 and 1995. Budget growth for the large national advertisers was greatest for those most affected by extra outlays for summer Olympics programs and higher TV spot expenditures brought on by the extra demand of political advertisers.

In 1997, the extra stimulus won't be present and advertising growth will be much more modest.

Growth in TV advertising this year will be very modest compared with the exceptional increases posted last year. Most of the large gains appear to be associated with premium events such as the Super Bowl.

Nielsen Media Research ratings for the networks continue to slip below year-ago levels and ad expenditures in the summer quarter are sure to be much lower than they were last summer.

Full-year 1997 network TV ad revenues could be a little above 1996 levels, or possibly below, depending on audience trends and results of upfront negotiations now going on for the coming 1997-98 season kicking off in the fall.

Spending levels for non-network TV advertising so far this year are only moderately above year-ago levels. Unless some key business categories begin to spend heavily soon, the first half of 1997 will barely exceed the levels of the comparable period in '96. The second half will be hard-pressed to even match second-half '96 levels.

The media that did the best a year ago will have the greatest difficulty making any sizable comparative gains in 1997.

In other areas, cable TV probably will manage to post large gains again in 1997 if Nielsen ratings for broadcasters continue to slide.

Reports from the print media indicate a much better comparative performance than a year ago. Newspaper ad linage is up; piece volume in mail advertising has improved; and magazine ad pages are up so far this year, in contrast to declines a year ago.

FINAL 1996 FIGURES

In some of those media, local marketers are of vital importance and such companies' ad-budget growth also significantly outpaced the 4.4% growth in nominal GDP-with a 6.8% increase over 1995. Firmness in broadcast orders and prices partially explains the relatively good increases in many local marketers' outlays.

Newspapers, the largest medium for many local enterprises, did relatively well, mainly because of strong increases in classified advertising. Help-wanted, real estate and automotive classified revenues increased at a double-digit pace in many markets last year. However, the pace of recovery in retail newspaper ad activity was spotty, and as yet has not returned to pre-recession levels.

That could gradually pick up as retailers gain better control of their financial problems but, on the other hand, the previous newspaper-dominated local marketing strategies may never be fully restored.

CABLE REVISIONS

In cable, the levels of our previous reports for both network and non-network ad expenditures are being revised upward. The revisions are based on information made available in recent years by the Commerce Department.

Refinement is necessary to make the data comparable to those reported for other media and to break the cable total down into the network and non-network parts. For the first time, we can be confident the cable figures are based on objective data.

As 1997 gets more fully under way, it appears certain that, despite downsizing, restructuring and many changes in competitive marketing strategies, advertising is still being employed importantly by most marketers.

The economy-and sales of most marketers-will probably rise by about 5% this year. We expect most marketers to maintain advertising's share of their marketing budgets.

The full-year results will surely be mixed, however, and print media are likely to show the best gains this year.

Advertising should match or slightly outpace economic growth and, barring a significant economic slowdown, we expect advertising's growth momentum to hold through the rest of this century.

Mr. Coen is senior VP-director of forecasting at McCann-Erickson Worldwide, New

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