• by Paul Gough , June 16, 2004

A media reporting firm unveiled a more upbeat forecast on ad spending, predicting that the third quarter would be the strongest, but that growth would peter out a bit in the fourth quarter.

Second-quarter ad spending will rise an estimated 9.3 percent compared to the same period in 2003, according to a forecast by TNS Media Intelligence/CMR. That's atop 9.6 percent growth reported in the first quarter and a prediction of a 10.9 percent increase in the third quarter, and a less-robust-but-still-respectable 7.7 percent rise in ad spending in the fourth quarter.

CMR predicts that 2004 ad spending would rise 9.3 percent to $140.3 billion, including the effects of Olympic advertising and the predicted record election spending. The forecast was released Wednesday at the AdWatch 2004 conference, sponsored by Ad Age and TNS Media Intelligence/CMR.

All but one of the 11 media tracked by CMR will have strong growth in 2004, with the exception of business-to-business media, which will decline 1 percent off what was a miserable advertising recession for the industry. Internet advertising will have the strongest growth, rising 15.8 percent in 2004. Spot TV, fueled by the stronger economy as well as political and Olympic spending, will see 14.3 percent growth, and radio as a whole will rise 11.5 percent this year. Also strong will be cable TV (up 9.9 percent), network TV (up 9.8 percent), syndication (up 9.8 percent), and outdoor (up 8.4 percent).

"2004 is shaping up to be a very good year for advertising," said Steve Fredericks, president and chief executive officer of TNS Media Intelligence/CMR

But he warned Wednesday not to put too much trust into the data being released right now on the health of the upfront marketplace. He said initial growth estimates "tend to overstate the magnitude of the actual ad spend." Fredericks said that there's always a fourth-quarter cancellation level that translates into a lower level of network TV ad spend.

CMR backed off slightly from its earlier forecast, which had ad spending starting off slower and then increasing steadily through the year as the third quarter's Olympics and campaign advertising boosted returns in advance of a traditional fourth-quarter surge. Fredericks said the first quarter came out ahead of predictions, and that at least one economic report by a big investment bank suggested that fourth-quarter GDP wouldn't be able to sustain the growth rate it's been setting since last year.

"But the second half [forecast] is still rather robust," he said.

Fredericks predicted that the Athens Summer Olympics would add about $850 million in incremental ad spending, above the $750 million reported in 2004.

In an interview after his presentation, Fredericks said that a fundamental shift was happening in business-to-business advertising.

"It's very clear to me that it's a question of targeting the audience," he said. "A lot of people go to the Internet to find their information." It's a fact that has blunted the impact of traditional B-to-B advertising.

2004 Quarterly Ad Spending Trends

Change Vs. 2003  
First Quarter               +9.6%  
Second Quarter              +9.3%  
First Half                  +9.4%  
Third Quarter              +10.9%  
Fourth Quarter
+7.7%  
Second Half                 +9.2%  
Full Year                   +9.3%  

Source: TNS Media Intelligence/CMR estimates.