Ad spending rose 6.7% to $7.6 billion in February vs. a year ago, according to an analysis by Advertising Age of data from Taylor Nelson Sofres' CMR for 10 traditional media. February marked a dramatic turnabout from January, when spending fell 8.6%. CMR data show ad spending last year slumped 9.8%, the biggest dropoff since the Great Depression.
Although the ailing ad market welcomes any move into positive territory, most industry watchers aren't ready to uncork the champagne.
"I would keep it chilled, but I wouldn't open it," said David Peeler, president-CEO of CMR. "It does seem like [the ad market] is not going further south," he said, "but everybody's looking for legs."
Until February, year-over-year spending fell each month since December 2000. The rate of decline, though, has been coming down steadily since the nadir of September, the month of the terrorist attacks, when spending plummeted 21.8%.
The rise in media spending was driven primarily by the 40.4% spike in network TV expenditures. But the big TV uptick is an anomaly, driven by the Olympics; the Super Bowl's staging in February this year vs. January last year; and tighter, higher-priced TV inventory resulting from make-goods for under-delivered audiences. In addition, 2001's depressed numbers make year-over-year comparisons easier.
The 6.7% boost is "a cartoonishly good number for February. All things being equal, February is up maybe 1%," said Michael Russell, executive director at Morgan Stanley. "I don't think this is a particularly meaningful number, because there are so many things you have to correct for."
The real positive news is that an uptick could occur in May, earlier than previous second-half projections, Mr. Russell said.
February's results were decidedly mixed. Despite network radio's 9.8% rise in CMR February data, the Radio Advertising Bureau reported a 5% decrease in combined local and national radio ad revenue. "We're looking at this market with extreme caution. It's very volatile," said Natalie Swed Stone, senior VP-director of national radio services at Omnicom Group's OMD USA, New York. Despite gains in network and spot TV and network radio, magazine and cable TV spending were down 11.1% and 9.2%, respectively.
"I think what we're seeing are easy comparisons and pockets of strength," said Alexia Quadrani, an analyst at Bear, Stearns & Co. "The tide isn't shifting," and it won't before the second half, she said.
"I'm not ready to call it a turnaround. There is still some fragility," said Mr. Peeler, adding that some traditionally big ad categories such as telecommunications are still struggling.
Tim Spengler, exec VP-director of national broadcast at Interpublic Group of Cos.' Initiative Media North America, Los Angeles, agreed. "We will need, at a minimum, a strong retail Christmas season and additional corporate profits" before a turnaround, which he said will not occur until 2003.
Yet amid the caution, some analysts contend recovery will come sooner.
"There are more advertising categories that are beginning to spend," said Chris Dixon, managing director at UBS Warburg. "That's by no means to say that it's going to be up significantly, but the worst is over."
Drew Marcus, managing director at Deutsche Bank Securities, said his previous forecast that advertising would increase 1% in 2002 might be conservative. "The turnaround is happening right now. I think it started in the first quarter, and it's gaining strength in the second quarter. We're feeling optimistic about the ad market in 2002."