Editorial: Media's only option is change

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U.S. measured ad spending rose 4.4% in the first quarter, the smallest gain since the end of 2003, and spending for the year will increase a sluggish 3.4%, the worst since recovery began in 2002, says TNS Media Intelligence. That's bad news for media. But the numbers tell only part of the story and are not necessarily indicative of what's happening with marketing spending overall.

TNS, Universal McCann's Robert Coen and Merrill Lynch all cut their 2005 ad-spending forecasts, and one conclusion is clear: This not-so-great media ad recovery is running out of gas. The economic expansion, nearly 4 years old, is shaky. Media spending, whose decline foreshadowed the last recession, is shakier.

But ad spending estimates are becoming a less significant industry barometer at a time when marketers are plowing money into a range of marketing services and media are feverishly developing alternatives to advertising such as product placement and other plays on Madison & Vine.

TNS and its rival, VNU's Nielsen, deserve credit for their efforts to measure emerging areas such as branded entertainment. The two firms work hard to deliver consistent data and explain their methodology. But shortcomings are significant. For example, Publishers Information Bureau, the source for TNS magazine numbers, collects data from magazines based on the one-time page rate. That dramatically overstates revenue in a category where rate-card and volume discounts are prevalent.

Some measured figures are understated. TNS reported first-quarter Internet advertising of $1.9 billion, up 8% vs. 28% growth a year earlier.

A Net slowdown? Hardly. TNS doesn't count paid search, the hottest play in Net ads. So it reported no revenue from paid-search ruler Google, whose first-quarter U.S. ad revenue, by our calculation, rocketed 71% to $767 million.

Measured-media reports and ad forecasts are inherently imprecise, and better metrics are needed. Still, all the data add up to one real story: more alternatives for marketers, a slowdown in advertising-and tough times for media that don't take bold measures to adapt to a market in transition.

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