Universal McCann forecaster Robert Coen forecasts total U.S. advertising growth of 4.8% next year compared to 5.2% this year.
U.S. advertising expenditures will slow next year, thanks to a slowing economy and continued caution on the part of major marketers, according to Robert J. Coen, senior vice president and director of Forecasting and Universal McCann.
Coen, who delivered his predictions at the 2006 UBS Global Media Conference in New York, estimated that total U.S. advertising will grow only 4.8% next year, compared with an estimated 5.2% increase this year.
“There is considerable concern about economic softening as energy prices bounce up and down and the housing sector continues to show signs of weakness,” Coen said.
Network TV advertising will rise 3% in 2007, Coen predicted, compared with a 5% estimated gain in 2006.
Coen expects flat growth for national spot TV next year, thanks to a lack of Olympics and significant political revenue, which this year pushed the sector to what he estimates will be an 11% increase. A flat forecast for national spot could be seen as optimistic, given that some industry sources have forecast a decline next year. Coen counters that this year’s weak growth among traditional national spot categories, such as automotive, retail and restaurants, will make 2007 comparisons to this year less onerous.
“In a typical election year, national spot would be up 14%,” Coen said. “Because it isn’t, comparisons next year will be a little easier.”
Coen also holds some optimism that increased competition among auto and packaged goods manufacturers may spur more growth in advertising. “I would be surprised if national spot was down 4-5% next year,” he said.
For local TV, Coen forecasts a 4% increase next year, compared with a 5% gain this year. Local marketers are “attempting to cope with a number of new marketing developments that are working to reduce their total demand for traditional media advertising,” Cohen said, explaining why local advertising growth has been less than robust in 2006 and will remain that way, most likely in 2007. One problem: consolidation among retail outlets is “reducing overall demand for retail advertising.”
Big national advertisers, as well as smaller, local ones, are struggling to keep up with technological changes that are affecting their marketing strategies, Coen said. “New technology is affecting basic advertising strategies and there is considerable confusion about what is happening in marketing communications,” he said.
Cohen held out one small ray of hope for stronger 2007 growth, although he maintained it is more likely that strong advertising growth will arrive in 2008. The hope lies in corporate profit margins, which are extremely strong. “In the last five years, American corporations have enjoyed exceptional double digit profit growth,” Coen said. “Companies are now loaded with cash and their balance sheets are in great shape. There are plenty of reasons for pessimism about advertising growth in 2007. However, there is also the possibility of an overdue return to more traditional advertising.”
During the first nine months of 2006, Automotive companies boosted their spending in spot TV by 4%, Coen said, while restaurants increased their spot TV outlays by 3%. Telecommunications companies boosted spot TV spending by 34% during the same nine months, while computer companies’ spending rose 67%, apparel climbed 37% and liquor rose 119%.