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International: Media Spending in '07? Don't expect big boost<br>Next year appears depressingly flat

11-December-2006
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International: Media Spending in '07? Don't expect big boost<br>Next year appears depressingly flat

Want one forecast rather than five forecasts? Media spending next year will be depressingly flat.

If you don't like that Ad Age conclusion -- which is based on a thorough analysis of the history of media spending and our read on the many factors affecting media right now -- you can go with one of the many marginally more optimistic forecasts proferred last week.

Group M went with 2.4% overall growth; eMarketer went for 3%; ZenithOptimedia 4.1%; and Universal McCann 4.8%. There are also Merrill Lynch's forecasts: 2.6% when calculated bottoms-up by industry and 2.7% when calculated top-down by media.

Take the average of those predictions, for what they're worth, and you have media rising 3.6% next year, just above the rate of inflation. But the media market has arguably never been in greater flux than it is today, meaning that there are some huge unknowns lurking in the shadows.

Not least is the fact that marketers are spending more of their money on nonmedia marketing tools (direct, events, point-of-sale) than ever before and embracing the theory that they need to create great content and brand experiences that consumers will seek out rather than spending big to 'push' their messages at consumers. Procter & Gamble's corporate site, for example, draws more eyeballs than many of the prime-time TV shows where the company advertises. And Anheuser-Busch is building a 24-hour web network called Bud.tv.

As to those potential surprises around the corner, just think about '06. Who would have predicted Google would pay $1.65 billion for YouTube, while a pair of teen magazines-with combined paid circulation over 2 million-got shut down?

It's hard for ad-spend forecasts to incorporate the fallout from developments like those. So smart directional guidance, with an allowance for the chance of "flat," is the best top line that the industry has. Deeper down, the differences among reports at least highlight the uncertainty, while some specific disagreements pinpoint areas really worth watching. Here's the partial tour.

ADS ON PAPER

Newspapers may be hugely profitable, but even including their online classifieds, the top-down prognosis from Merrill Lynch predicts their ad revenue will fall 1.5% next year. The Morton-Groves Newspaper Newsletter anticipates a 0.6% decline when online is included and a 2% decline when it's not. The bulls include McCann, which expects a 1.8% rise, and Zenith, looking for a 2% gain.

Publishers are striving to prove the bulls right. Everyone is pushing digital, finding costs to cut and developing hyper-local coverage. "We are neither myopic nor ignorant," said Gary Pruitt, chairman-CEO of McClatchy Co., speaking to analysts at the Credit Suisse media conference last week. "Once again newspapers face an evolutionary imperative: Adapt or die."

Consumer magazines have a better outlook. McCann predicts at a 5% gain and Zenith estimates 5.3%. Merrill sees consumer magazines expanding revenue by 2.5%.

ADS ON SCREENS

Someday it will be hard, or pointless, to separate screen-based media into categories such as TV and the internet, much less network TV and cable, but for now the differences remain real and important. "In 2007," Zenith writes, "as more online opportunities draw ad dollars from traditional media and sports coverage continues to migrate to cable networks, broadcast TV will stagnate."

In this case "stagnate" means "fall 1.5%." Merrill more or less agrees, forecasting a 1.2% decline for the networks. Again McCann provides the mirror a lot of media sellers will prefer, calculating 3% increases for ABC, CBS, NBC and Fox. But everyone expects cable to rise, Merrill by 5.8%, Zenith by 6% and McCann by 6.5%.

Although the web's ad-revenue growth is slowing, the pace in 2007 will still blow everything else away. The big question is how much. On the low end, McCann predicts 15% growth; on the high end, Zenith sees 29% coming.

The figure is just 18.9% at eMarketer, but its forecast differs from the others to say web ads will match radio next year and pass it in 2008. "It's one thing for internet ad spending to surpass relatively minor media such as outdoor or yellow pages, but it's quite another thing to blow past radio, one of the big four traditional media," said David Hallerman, senior analyst.

If you're wondering what TNS Media Intelligence has to say, by the way, that outfit might play its predictions the safest of all: It won't make a 2007 forecast until January.

Source: Adage

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