Zenith, Merrill predict better '06, worse '07

Politics, World Cup, local TV will drive ad spending this year

By Published on .

Good news: Two ad forecasters tweaked their 2006 U.S. ad forecasts upward. Bad news: 2007 doesn't look so hot.

ZenithOptimedia, in a report to be released today, predicts U.S. spending in major media will grow 5.2% this year, vs. the 5.1% it forecast last December.

Merrill Lynch also bets on 5.2% growth in measured media, up from its previous 4.6% forecast.

ZenithOptimedia trimmed its '07 U.S. growth estimate to 4.2% from 4.4%. Merrill Lynch, in a report last week, was more pessimistic in its first prediction on '07 U.S. media growth: 3.5%.

Worldwide, ZenithOptimedia expects '06 spending to grow 6% (vs. its earlier forecast of 5.9%) and '07 spending to grow 5.6% (vs. 5.7%). Merrill Lynch predicts global growth of 5.1% in '06 and 4.2% next year.

In the Merrill Lynch report, analyst Lauren Rich Fine said the uptick in the '06 estimate reflects expectations of higher political spending on TV and more growth in smaller media categories offset by downward revisions in newspapers and radio.

The investment firm expects spending on local TV stations to grow 6.3% this year, with network TV up 4.4%. Local cable operators will see 10% growth, with cable networks up 7%, Merrill Lynch said.

Merrill Lynch predicts just 1.8% growth this year in newspaper spending. It expects Internet advertising to soar 27.8% to $14.5 billion, making the Internet bigger than magazines ($13.2 billion, up 2.5%).

Ms. Fine expressed caution in the report, saying, "We do not sense good momentum across most of the traditional media." Ms. Fine's analysis noted that economists predict slower U.S. economic growth next year, which she said adds a downside risk to Merrill Lynch's '07 ad spending forecast.

Publicis Groupe's ZenithOptimedia said fervor over soccer's World Cup will help drive global ad growth in 2006. While worldwide spending growth will slow slightly in '07 and '08, the media agency said, ad spending each year from 2006-08 should grow faster than world gross domestic product.

Ad spending's share of the world economy also is growing, ZenithOptimedia said. Ad spending accounted for 0.96% of world GDP in 2005, and that will rise to 0.99% by 2008, ZenithOptimedia said. That's still below advertising's peak of 1.08% of GDP in the bubble year of 2000, but the agency said it appears "the advertising cycle has at last emerged from the trough it entered in 2001."

Emerging markets are fueling the growth. Between 2005 and 2008, ZenithOptimedia said, six of the 10 largest contributors to ad growth will be emerging markets: China, Russia, Indonesia, Brazil, Mexico, Poland.
In this article:
Most Popular