Positive Signs for the Ad Industry

It may be small, but at least it’s a positive figure for the struggling advertising industry where a report from Global Insight, Inc. finds that the U.S. ad market should experience a 6 percent increase in 2003. Driven by corporate profits, retail sales, and consumer disposable income, the advertising industry could be poised for successive years of growth, peaking in 2003, and then declining slightly every year through 2006.

Global Insight predicts that the largest growth through 2006 will come from radio, cable and the Internet, and the industries spending the most money, in terms of growth, through 2006 are: entertainment; wholesale and industrial suppliers; security and commodity brokers; insurance carriers and agents; and business services companies.

Jupiter Research (a unit of this site’s corporate parent) is equally optimistic, particularly in the online advertising segment. Jupiter expects the industry to earn $6.2 billion in 2003 – up from $5.6 billion in 2002 – and gain momentum into 2007, where it will grow to $14 billion.

Jupiter attributes much of the advertising growth to an abundance of online households – more than three-quarters of all homes by 2007 will be online – and increased time spent on the Internet.

Further positive indications come from CMR/TNS Media Intelligence, which predict a 3.3 percent increase in ad spending in 2003, up to $117.5 billion.

“For 2003, we see a continued rise in ad spending,” notes Steven J. Fredericks, president and chief executive officer, CMR/TNS Media Intelligence. “The spending growth seen in the last half of 2002 was clear evidence of a market rebound, and we believe the current economic upturn, while not robust, will continue to be reflected in the modest growth of advertising.”

CMR/TNS expects strong spending growth through the first half of the year, due to more favorable year ago comparisons, with lower growth rates as the year progresses. The 2002 3rd and 4th quarter figures represent a slight market recovery.

The firm predicts Spanish language television to lead the spending, growing 9.2 percent from its 2002 total, followed by Internet advertising at 7.4 percent, and cable TV advertising at 4.8 percent. The smallest gain at 1.9 percent is expected to be spot TV ads.

Even though 2002 was a disappointing year for the ad industry, a joint report from The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) revealed slight improvement – albeit 1 percent – from the third quarter over the second quarter. Compared to the year-over-year declines (Q3 2002 showed an 18 percent decline over Q3 2001, and Q2 2002 dropped almost 22 percent from Q2 2001) the 1 percent increase seems like a hopeful indicator for 2003.

“The return to positive growth in both online and offline media is a healthy sign for the overall advertising industry, but should be viewed cautiously, as we believe that the positive steps that are being taken are as much cost-driven as they are recovery oriented,” said Tom Hyland, chair PricewaterhouseCoopers New Media Group. “Add to that the historically stronger performance of the fourth quarter, and it appears interactive advertising may end the year with two consecutive growth quarters.”

Marketers are beginning to regain their confidence in online advertising as research from DoubleClick finds that 51 percent expect a budget increase in 2003, and 57 percent plan to increase spending on email marketing.

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