• by December 6, 2005

CRYSTAL JUMP BALL -- Bob Coen's ad forecasts are an important benchmark for anyone trying to understand how advertising markets work. It's not so much that Coen's semiannual predictions for ad spending increases or decreases are all that much better than anyone else's--from what we've observed over the years, they are not. It's because they ultimately prove to be self-fulfilling. In the end, when all's said and accounted for in the advertising world, Coen's final estimates are used as the official source of advertising spending by most of the important sources for such information: the major industry trade associations, and the U.S. government. That's a lot of power and influence and we've marveled over the years as rivals have attempted to unseat the Universal McCann director of forecasting's authority as - if not its best soothsayer - its official bean counter. Wall Street analysts have come and gone, as have ZenithOptimedia gurus: First Betsy Frank, then Audrey Steele, then John Perriss, and now Steve King.

In fact, among Madison Avenue's major agency holding companies, only Interpublic's Universal McCann, and Publicis' ZenithOptimedia, have sought to issue regular advertising forecasts and benchmarks. While Aegis Group's Carat puts them out from time to time, it, unlike ZenithOptimedia, doesn't appear to be trying to steal Coen's thunder or usurp his authority. Other majors include Merrill Lynch's Lauren Rich Fine' investment banker Veronis Suhler Stevenson, newsletter publisher Jack Myers, and data aggregator eMarketer. Of course, there's also Interpublic's own Brian Wieser - director of industry analysis at Magna Global - waiting in the wings for the day when octogenarian Coen actually retires. We gave up guessing when that would be a long time ago. You'd have to be a seer to know.

Anyway, there are now so many disparate sources using such a myriad of methods, data and intuition, that over the past two years, MediaPost has begun publishing its so-called "The Ultimate Forecast," a compilation of the industry's leading stat rats. We're not saying who's right and whose wrong, we're just pulling it together in one easy place for you to judge for yourself.

Enough with the shameless self-promotion already, this column is about the influence Bob Coen has on shaping perceptions about the advertising economy. We've already said it's a lot, so when Coen alters a key component of his forecast methodology, we think it's worth noting. And that's what he says he's done, adding a new advertising category - "fitness/diet programs" - to replace one that's going up in smoke: cigarettes. The move, which we consider to be akin to a new company replacing an old one in the Dow Jones Industrial Average, says a lot about the advertising business, as well as modern day America. By at least one measure, we've replaced smoking with health. Unfortunately, the replacement has not proven to be nearly as healthy as tobacco once was for Madison Avenue. Through the first nine months of the year, ad spending by fitness/diet programs grew only 1 percent, according to Coen. That would not seem to be enough to replace the rapid erosion of cigarette ad spending, which is down 40 percent during the same period.

The category replacement also reveals something else: That the subcomponents of the advertising economy aren't as static as some people think. Categories - even major ones - come and go. That's evident from another category Coen began tracking a few years ago: dot.coms. Dot.coms aren't really an advertising category, of course, but are a synthesis drawn from other categories, mainly electronic retailers who market products online. Anyway, they appear to be marketing more of them again. At the very least, they're advertising more of them. Ad spending by dot.coms is up 35 percent from 2004 to $3.715 billion. That doesn't match the record dot.com spending of $5.597 billion by dot.coms in the pre-crash year of 2000, but it's beginning to creep back up again.