Optimism Drives Ad Forecast Revisions

Evidence an ad recovery is underway comes from forecasts from both Merrill Lynch and Universal McCann, with upward revisions to previous U.S., overseas, and global estimates. The Internet is a likely beneficiary of the advertising optimism, along with broadcast television.

In a forecast released this week, Merrill Lynch revised initial figures, raising U.S. and global predictions by half a percentage point each. U.S. ad spend is expected to grow 6.3 percent in 2004, while global growth is measured at 5.5 percent. The forecasts are in stark contrast to previous years, when growth was non-existent or barely measurable.

Advertising Growth Forecasts
Year U.S. Global
2001 -6.3% -8.2%
2002 2.1% 1.2%
2003 3.8% 2.4%
2004E 6.3% 5.5%
2005E 5.5% 5.0%
Note: E = estimated
Source: Merrill Lynch

Internet advertising is expected to grow 20 percent, up from 16.9 percent in 2003. Broadcast television will make the greatest year-over-year leap, from -0.3 percent in 2003 to 6.6 percent in 2004, followed by radio advertising – 1.1 percent in 2003 compared to 5.6 percent in 2004.

Robert J. Coen, senior vice president of forecasting at Universal McCann, was similarly optimistic in his predictions at the Universal McCann briefing for investment analysts and the business press earlier this week.

Initial 2004 projections for U.S. ad spending of 6.9 percent growth has been revised to 7.3 percent, and the preliminary figure of 4.5 percent growth for overseas spending is now expected to reach 4.8 percent. Coen further forecasts worldwide advertising growth to reach 6.0 percent in 2004, resulting in US$519.4 billion. The U.S. will account for roughly half of the worldwide total at US$263.3 billion.

Like Merrill Lynch, Coen forecasts Internet spending to grow to 20 percent, representing a huge increase over 2003’s 2.8 percent. Last year marked the first positive growth since 2000, when it peaked at 81 percent.

Analysts expect the ad industry will be energized by the Olympic Games and heavy political activity. ZenithOptimedia had previously noted these two events, coupled with European Championship football and elections in Canada, would spur advertising spending.

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