Research Center >> February 2008

Forecasters Expect Stronger Second Half Ad Spending in 2008
Internet and niche media growth to continue. Olympics and elections to temper slide in
traditional media.
from AICPA Custom Media Solutions

Total U.S. measured advertising spending is projected to increase 4.2 percent in 2008, according to the full-year forecast by TNS Media Intelligence. Measured expenditures are forecast to grow by 3.6 percent in the first half of 2008 followed by a gain of 4.7 percent in the second half.

“Spending gains will be driven predominately by the powerful combination of Summer Olympics and record-setting levels of political advertising,” said Jon Swallen, SVP Research of TNS Media Intelligence. “The continued double digit growth rate of Internet display advertising, offset by a weakened economy, will have a dampening effect on the broader, core advertising market.”

Meanwhile WPP's GroupM unit just issued a new report calling for tepid growth in the U.S. ad marketplace — rising 3.7 percent — and it will come almost entirely from two factors: cyclical stimuli like the Olympics and elections; and increased ad spending on the Internet. Without the incremental effects of the Olympics an election spending, GroupM predicts U.S. ad spending would rise only 1.8 percent this year. And without the effects of the Internet, the U.S. ad market would rise only 0.6 percent, about the same rate it grew during 2007. “We have been bearish on the USA since we started publishing these forecasts in 2006: soft house prices trumped strong profits. Demand for traditional media appears to have anticipated the current global slowdown,” GroupM Futures Director Adam Smith writes in the new report, the latest quarterly installment of its “This Year, Next Year” series.

Likewise, the TNS report predicts that Internet display advertising will continue growing at double-digit rates in 2008 with Spot TV, Spanish Language Media, Outdoor and Cable Network TV also exceeding the overall market average. Consumer Magazines and Network TV are projected to post small gains versus 2007, while Business-To-Business Magazines and Newspapers are expected to experience outright declines in ad spending.

Swallen concludes “The Internet will continue to gain share, principally at the expense of newspapers. Our projections for the 2007-2008 cycle indicate television and magazines will maintain their shares, while the Internet will move past radio.”

“We estimate that measured Internet will occupy 10 percent of global media investment in 2008 and contribute 28 percent of growth,” WPP's GroupM’s Smith predicts, noting, “Internet revenue is still conventionally reported as a single figure encompassing display, search, classified and sometimes a small amount of e-mail. But it is misleading to treat this as a single medium. In particular, we would prefer to isolate search, which is mainly used for direct marketing, from display. They serve different advertisers in different ways and require different management.”