• by Jack Loechner , Staff Writer @mp_research, January 3, 2006

The recent issue of the Universal McCann Insider's Report presented highlights of Robert J. Coen's 2006 advertising predictions delivered at the December UBS Global Media Conference. Coen prefaced his presentation by noting that in 2005 the U.S. economy expanded a little more than had been expected, but advertising growth has failed to outpace 2005's nominal GDP growth of 6.3%.

In 2005, the article reports, national marketers continued to be overly cautious despite the relative improvement in economic conditions. Because company stock prices remained below previous highs all expenses, including those for advertising, were firmly controlled in 2005. Strong resentment of recent high media price increases was widespread and, as ad demand slowed in the year following the Summer Olympics and Presidential election. The pressure for measurable evidence of the return on advertising investments grew. These and other forces combined to interrupt the expected renewal of strong advertising competition and the expansion in advertising spending. The projection for total national advertising in 2005 is now $177,147,000,000  for a gain of 6.0% over 2004. When final Fourth Quarter revenue numbers for the broadcast TV Networks are in, it is expected that the full-year gain will be at best about one percent.

The changes in national marketers' advertising spending in many of the traditional mass media have been modest in 2005 but one exception has been mail advertising.

In the first half of calendar year 2005, the number of pieces of mail sent at the regular standard mail rate, used for most advertising, increased nearly 5%. This trend has been influenced by the telemarketing restrictions; but it is also another indication that marketers have, in recent years, focused their marketing resources on more immediate measurable short-term responses. Coen expects that many of these programs will be continued and even expanded in 2006 despite higher postal rates and higher paper, printing, and handling costs. 

Total National Advertising in 2006 is expected to increase at a slightly faster pace than it did in 2005. The rate of gain in spending by National Marketers for broadcast network television ads next year will be helped by the Winter Olympics and easy comparisons with 2005. Heavy Spot TV advertising gains are anticipated next year because of the intense political contests that are due to occur in 2006.

In 2006 National Advertising growth should again outpace general economic growth, but ad spending by Local Marketers is not expected to improve much in 2006. The extra demand due to political spending will put some extra pressure on local media prices next year. 

The combined spending for advertising next year by National and Local Marketers is now projected for a total of $292.0 billion, a gain of 5.8% over 2005. Next year we expect U.S. advertising to approximately match the growth in the economy, but advertising as a percent of GDP will probably remain at the stalled 2005 levels. 

To read the complete article, including summary charts of 2005 estimates for various categories of advertisers, please visit the McCann report.