Zenith forecasts rise in 2003 ad spending

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The end is here. At least according to ZenithOptimedia.

In its most optimistic forecast of the last two years, the media agency declared that the global advertising recession will end this quarter and that worldwide spending will rise 2.9% in 2003.

U.S. ad spending in 2003 is forecast to grow by 1.9%, according to ZenithOptimedia. For 2002, the company revised its U.S. forecast upward by 1.4%, or $2.6 billion, to $143.5 billion, said John Perriss, ZenithOptimedia's chief executive.

Mr. Perriss, who will deliver the forecast today at a UBS Warburg media conference in New York, attributed the improved 2002 forecast to higher-than-anticipated spending on the recent elections, and to some marketers taking advantage of cheaper media pricing.

For next year, "no big increase is forecast in corporate profits, but strong consumer demand is encouraging advertisers," Mr. Perriss said. ZenithOptimedia is owned 75% by Publicis Groupe and 25% by Cordiant Communications Group.

Consumers in the U.S. and U.K., for example, have rushed to refinance their homes and spend on new cars, apparel and vacations, he said.

tie to consumer spending

ZenithOptimedia's forecast depends heavily on consumer spending holding up, especially in the U.S. market, since it calculates that the U.S. accounts for 48% of worldwide ad spending. "You'll never get any recovery without the U.S. leading it," said Mr. Perriss.

He pointed out that the top 10 U.S. advertisers increased their ad spending in major media by an average of 4% for the first eight months of 2002, including a 20% jump by Procter & Gamble Co.

Recovery is slowest in Japan and Germany.

"There are still some dark spots," said Mr. Perriss. "In Japan there isn't much sign of any recovery, although at least it's not getting any worse, and Germany is showing all the signs of becoming another Japan."

ZenithOptimedia predicts that TV spending worldwide will add 0.8 of a share point in 2002, accounting for an all-time high of 38.5% of all ad spending. That figure is forecast to grow to 39.6% in 2005. Print's rebound is expected to be slower. The report notes that TV spending in the U.K. will be up 4% this year, but that print growth won't come before 2006. In France, TV and radio spending is predicted to rise in 2002, but newspaper spending isn't expected to improve until 2004.

ZenithOptimedia noted that while the ad market has bounced back from recession, recovery in 2003 and beyond will be muted. Still, Mr. Perriss said he doesn't anticipate downgrading his forecast if there is a war against Iraq. He compared the risk to the Gulf conflict a decade ago that made a poor economy worse without having a measurable impact on advertising, although some sectors such as travel were hard hit.

As anecdotal evidence of the continued vulnerability of that sector, Mr. Perriss said that he is being charged $247 per night this week for his New York hotel room, down from $400 three years ago at the same hotel.

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