"In light of recent economic reports, we are revising our forecast slightly downward," the Magna team reported, noting that the estimates, which bring its 2011 U.S. ad spending projection to $173.1 billion, exclude the impact of political and Olympic advertising. "While we see the disruption from the earthquake in Japan and high gas prices as temporary, the economy still suffers from a depressed housing market, sluggish employment conditions, and fiscal retrenchment at all levels of government. Our previous forecasts had already conservatively assumed a slowdown in the second half of 2011."
Despite the overall downward correction, Magna remains bullish on online ad spending, noting that the medium's growth "exceeded our expectations in the first quarter as the share attributed to national media (primarily reflecting digital display and online Video) was significantly higher than recent trends would have predicted. Though some premium display publishers may have seen a slowdown stemming from the broader economy, National Online advertising overall benefited significantly from strong momentum in online video and social media as large national advertisers begin to invest more in building brand awareness online."
Magna's upward revision in online ad display spending follows other recent upgrades, including a fresh round-up released by eMarketer.
"Many of these advertisers are also investing more in paid search, allowing direct online media to outperform our expectations," the agency unit noted, adding, "We believe recent improvements made in search quality have benefited the sector and many more monetization opportunities exist in social media. Online advertising and Paid Search in particular, was likely helped by continued growth in e-commerce, which accelerated during the first quarter by 17.5% compared to the prior year period. For 2011, we now expect $30.1 billion in online advertising, up by 15.6% from 2010 levels.
Among more traditional national media, Magna cited "strength" in network and cable TV ad spending, pumping up the overall national marketplace, and showing local media to be the primary laggards.
"In total, we expect national TV to grow 7.9% in 2011, up from our previous estimate of 6.5%. Despite upward revisions to national mass Media, signs of a slowdown are concentrated in local mass media, driven by weakness in newspapers, radio and outdoor advertising. Direct media (which incorporates Internet Yellow Pages, paid search, lead generation, directories, and direct mail) has been particularly impacted by sharper declines in directories and a slowdown in direct mail," the agency said.