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TNS Media Intelligence Presents Predictions at AdWatch Conference

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NEW YORK ( -- Ad spending will increase 3.4% this year over last -- a fraction of the 9.8% rate at which it grew in 2004. It will total $145.3 billion, according to a TNS Media Intelligence forecast presented at the annual AdWatch conference in Manhattan this morning.
Steven J. Fredericks, president-CEO of TNS Media Intelligence, presented 2005 ad spending predictions this morning.

audio bug The 37 page TNS AdWatch presentation in .pdf format.
audio bug >Magazine ad sales increases look larger than they actually are

audio bug >Cable makes major gains over broadcast TV

audio bug >Ad money continues shift to Internet

audio bug >Newspapers continue to decline

Taking a cautious approach
TNS' president-CEO, Steven Fredericks, speaking to an audience of media buyers and sellers, ad agency executives and analysts gathered at the Hyatt Grand Central to hear their industry’s prospects for the year, said the slowdown was a ”result of advertising taking a cautious approach in the face of uncertain economic indicators and wavering consumer confidence.”

Although first quarter’s ad growth of 4.4% was the smallest year-over-year gain since the end of 2003, Mr. Fredericks said he was buoyed by the fact it was still outpacing GDP.

The AdWatch: Outlook 2005 conference is co-presented by Advertising Age and TNS Media Intelligence.

TNS predicts a rosier 4.1% rise for the first half of 2005 than for the second, which is expected to grow at a more sluggish 2.7% rate. That kind of third-quarter slowdown is natural, Mr. Fredericks said, in a year following a presidential election and Summer Olympics games, two events that drive ad spending by political parties and marketers.

Cable takes share from broadcast
The majority of media would see growth, with cable TV and Hispanic media more robust at 11.6% and 10.5%, respectively. “The real story here,” said Mr. Fredericks, “is that cable TV registered 18.2% growth to $3.5 billion, taking share from broadcast TV, which only grew 3.8%.”

Hispanic media, said Mr. Fredericks, has been fueled more by retailers such as Wal-Mart and Sears than by traditional advertisers, such as Procter & Gamble Co. and PepsiCo. “The insight to be made here is the companies who count the foot traffic and cash register receipts each day recognize firsthand the value of the Hispanic consumer,” he said, “and are targeting their marketing dollars to this key source of revenue.” According to TNS data, pharmaceuticals has devoted less than 1% of its total ad budget to print and TV and the auto category allocates about 4%. Telecom is approaching retail’s spending level on Hispanic media, but company by company the industry is “all over the place,” Mr. Fredericks said.

Internet up 7.6%
Internet will be up 7.6% -- a healthy number but not quite the double-digit growth the medium saw the last two years. TNS indicates that on a share basis the Internet has just now recovered to its 2001 levels, accounting for just over 5% of total ad spending.

“I don’t think we’ve seen such buzz around the media industry since its heyday in 2000,” Mr. Fredericks said. He noted the growth hasn’t just been fueled by blue chip marketers’ investments in interactive but also the marketers outside of the top 50 spenders that tend to allocate more of their budgets to Internet.

Magazines would be up 7.5% and outdoor would rise 5.5%. Newspapers were expected to see moderate 3.8% growth, syndication a 3.3% increase and network TV would grow 1.1%.

Radio, B-to-B magazines down
Three media were expected to see ad spending drops in 2005, including radio, down a sliver of 0.1%, business-to-business magazines down 0.9% and spot broadcast TV down 6.4%.

The significant downward forecast for spot TV was mostly attributed to the absence of local political elections this year and competition from spot cable.

Political advertising
Political advertising, Mr. Fredericks noted, has become a perennial category, as well. “Election 2004 was a watershed event with spending exceeding $1.45 billion,” he said. “The number and diversity of advertisers and messages created a roadmap of new standards by which future campaigns and advertising battles will be waged.” More than 400 mayors are up for re-election this year, he noted, including in San Antonio, Pittsburgh, Cleveland, Detroit and San Diego, will receive an injection of political advertising dollars this year thanks to high profile mayoral elections and “New York TV will get a huge chunk of change from Mayor Bloomberg,” he said. Outside of elections, special interest groups are advertising around causes, such as prescription drugs, the environment and, what is likely to be the next big the next big issue, a Supreme Court Justice appointment. To date, those groups have spent $90 million on advertising, according to TNS data. Fourth quarter, estimates Mr. Fredericks, could see an additional $50 million from groups spending money in preparation for the 2006 midterm election.

Mr. Fredericks also took on the notion that the TV upfront is considered a leading indicator of the medium’s advertising market, noting that the cumulative error over 14 years of predictions has amounted to $24.5 billion -- about $1.9 billion a year. In only five of 14 years was total TV ad spending within five percentage points of the upfront-based prediction. It’s a “poor predictor” because buyers can exercise options to cancel their buys during first through third quarters, the networks vary their sellout levels from year to year and, he said, drawing what were likely cynical chuckles from the buyers in the crowd, sellers are the primary reporting sources for the totals.

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