Coen: 2005 ad spending will increase to $280 billion

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Even with the ad infusion from the Summer Olympics and presidential election inflating 2004 numbers, 2005 is shaping up to see another record level of advertising as reticent marketers regain their confidence, according to Universal McCann's longtime forecaster Robert Coen.

American ad spending next year will increase 6.5% to $280 billion on top of this year's 7.3% jump to $263.3 billion, Mr. Coen said at his annual midyear Advertising Outlook Report. Last year, U.S. advertisers laid out $245.5 billion, a 3.6% jump. Barring any unforeseen calamities, said Mr. Coen, director of forecasting for Interpublic Group of Cos.' Universal McCann, 2004 should experience the highest spending since the previous record in 2000. Most years usually exceed the last, with 2001 and 1991 the recent exceptions.

"We are on an uphill trend. The recession is over," he said. He points to evidence that "the biggest, most important advertisers are committed to advertising."

Also last week Merrill Lynch analyst Lauren Rich Fine predicted 2005 would see a 5.5% increase and this year a 6.3% increase. Mr. Coen, who has made predictions for Universal McCann since 1948, tends to be more bullish than many analysts. His forecast comes on the heels of a TNS Media Intelligence/CMR report on June 16 that predicted U.S. advertising spending would hit $140.3 billion this year, up 9.3% helped by the Olympics and the election. Mr. Coen's numbers skew higher than CMR because he includes media that CMR does not, such as yellow pages and direct mail.

internet growth

The fastest growing sectors according to Mr. Coen, are the still small Internet at 20% growth, followed by cable TV at 14% and syndicated TV at 13%.

Mr. Coen's total number for this year was lower than his initial prediction in December because he based it on a 2003 number that turned out to be too optimistic since the expected fourth quarter surge in ad spending did not materialize. The economy peaked in 2000, bottomed out in 2001, began turning around in 2002 and surged last year. Advertising lags the economy, but a strong recovery is beginning to catch up and will outpace the economy once again next year.

"Lots of categories are not yet joining into expansion in advertising," he said, citing airlines, insurance and resorts as prime examples. He said dot-com companies that so skewed spending leading up to the recession were beginning to come back and will slightly exceed 2001 spending-though still half of the 2000 boom spending.

Universal expects total worldwide advertising to increase by 6% to $519.4 billion this year, with the U.S. still comprising just over half of that. Next year, the level should be up 5.9% to $550 billion, with U.S. spending at $280 billion-up 6.5%-and foreign levels at $270 billion-a 5.5% increase. Next year, he said, advertising growth in most countries would match or outpace economic growth.

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