• by Joe Mandese  @mp_joemandese, July 13, 2009

After more than three decades of providing the ad industry with estimates and projections for advertising cost inflation among the major media, Interpublic is phasing the service out as part of a broader restructuring of its ad forecasting and modeling effort. While less well known than the semi-annual advertising volume forecasts it releases, the media price inflation index has been a key resource for a wide variety of industry stakeholders, including agencies, media vendors, Wall Street, economists and the academic world. The index, the last of which was published in September 2008, was produced by now retired Interpublic Director of Forecasting Bob Coen, and published each year by the American Association of Advertising Agencies.

On Friday, on the eve of this morning's release of Interpublic's revised advertising forecast, Brian Wieser, Director of Global Forecasting for Interpublic's Magna unit, confirmed that the media inflation index would be discontinued as part of Interpublic's shift to a new method of forecasting based on calculating the advertising revenues of the major media (MediaDailyNews July 10).

While Coen is now officially retired, Interpublic said he would remain a consultant to the agency holding company, and a resource for his successor Wieser.

In his September 2008 media inflation forecast, Coen predicted, "There should be little media inflation in 2009.

"Consumers will continue to be concerned about high energy costs, the falling values of their homes and job security for the remainder of this year and throughout most of 2009. Consumer spending will be weak again next year and few marketers are likely to spend much more in advertising to chase after sluggish personal consumption expenditures," he explained, adding, "Business optimism will not improve until there are clear signs of economic improvement. Business expects little if any corporate profit growth in 2009, and ad budget increase will be rare. Advertising historically has lagged behind the economy and if demand does begin to pick up it will be later rather than earlier in 2009."

It's unclear how the overall industry might react to the loss of yet another valued source of advertising marketplace intelligence, but at least one long-time follower of Coen's media inflation data said it would be a significant loss.

"Discontinuation of the [Interpublic] media cost indices is a real loss. As far as I know, they represented the only comprehensive set of measures available for tracking year-to-year changes in CPMs by media in a consistent manner," said Alvin Silk, Lincoln Filene Professor Emeritus at Harvard University. "To his great credit, Bob Coen had carefully compiled the indices all the way back to 1960. Those data indicated how the rate of changes in media prices departed from economy-wide shifts in consumer or producer prices (e.g., CPI or PPI)-for certain periods and media, the differences were striking. Anyone doing serious econometric analyses of time series of advertising spending levels will certainly miss those data as a means of adjusting expenditure data for changes in media prices and thereby facilitating comparisons of nominal (current prices) and real (constant prices) growth rates in advertising expenditures.

"In recent years, the Bureau of Labor Statistics has developed a set of monthly price indices for various advertising agency services (e.g., creative and media placement) that are available from 1995 onward. Those data together with the [Interpublic] media price indices allowed a fairly comprehensive picture to be drawn of shifts in prices within the advertising services business. Hopefully, an industry initiative will be forthcoming to fill the gap arising from the loss of the [Interpublic] media indices."