News Brief

Merrill Lynch: Internet Ad Spending Outpaces Traditional

Almost two months into the New Year, Merrill Lynch said the only medium showing any real advertising growth is the Internet--and, to a lesser extent, cable TV networks--as the brokerage house retained its moderate stance toward projected 2006 ad expenditures. Merrill said it was standing by its previously released estimate of 4.6 percent growth in U.S. ad expenditures from 2006, which compares conservatively with a 5.8 percent growth estimate from Interpublic's McCann-Erickson and a 5.1 percent estimate from Zenith, a Publicis unit.

The Internet is expected to show the most significant growth--increasing an estimated 27.4 percent in 2006 compared to the previous year, according to Merrill Lynch. But, the report pointed out, even the Internet isn't immune from the vagaries of the media marketplace. "A couple of Internet advertisers have indicated that the return on their search expenditures had been hurt by higher keyword pricing in the fourth quarter," wrote analyst Lauren Rich Fine. "A DoubleClick report indicated that it could have been due to the higher minimum bids instituted by Google. We believe it is more a function of supply and demand for specific categories with particular seasonality. Further, as less sophisticated marketers enter the fray, this could happen more often. As a highly liquid market, the on-line paid search market should correct quickly, in our view." -- John Wolfe