Zenith spending forecast shows growth but no surge

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Spending on U.S. advertising will continue to track the country's economic growth but shows no signs of surging way ahead, as ad expenditure traditionally has done following recessions.

ZenithOptimedia's updated forecast for worldwide ad expenditure in major media, to be issued this week, merely tweaks its earlier U.S. spending predictions for 2004 to 5.7% growth. That's just a 0.2% bump up from the Publicis Groupe-owned media network's last forecast, in April.

ZenithOptimedia executives speculated that advertisers may simply be pouring more money into areas that don't register in major media expenditure totals, such as ambient and in-store media, product placement, sponsorship and co-promotions. "The amount spent on these is unknown but substantial," said Adam Smith, ZenithOptimedia's London-based head of knowledge management. "These outlets for advertiser demand-including the Internet-may, we think, partly explain the absence of rapid, inflationary recovery in traditional media which we have seen in past recoveries."

Europe may overtake U.S.

Greater competition can lessen media price inflation, he said.

"If media owners think they're in demand, they don't hesitate to put up prices," Mr. Smith said.

ZenithOptimedia also forecast that Europe, whose recovery has lagged behind the U.S. economy, will overtake the U.S. in ad spending growth next year, as Germany and the U.K. return to strong growth. According to the forecaster, European ad spending will grow by 4.2% this year and 4.0% in 2005, when U.S. growth will slow to 3.8%, down from 5.6% this year. ZenithOptimedia originally forecast 2004 European ad spending growth of 3.7%, but upgraded it to 4.2% in the new forecast.

In the U.S., ZenithOptimedia noted that spending is stronger than anticipated for both political advertising and the Olympic games, fueling further ad growth for the third quarter.

Despite those positive signs, ZenithOptimedia's forecast is always lower than Universal McCann's optimistic longtime forecaster Robert Coen. He upgraded his U.S. growth forecast last month to 6.5% for 2004 and 7.3% for 2005.

In a breakdown, ZenithOptimedia said magazine ad spending will continue to recover slowly, with 6% growth in 2004, followed by 4.8% growth for outdoor advertising and 4% for newspapers.

Ad spending in Japan, the world's second biggest ad market, is forecast to grow by 3% this year, a relatively high figure after years of little or no growth; it will slow to 1.5% in 2005, according to ZenithOptimedia.

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