• by Joe Mandese  @mp_joemandese, June 23, 2004

Proclaiming that the U.S. and world economies are "getting back to pre-recession levels," Madison Avenue's de facto scorekeeper Tuesday revised his outlook for 2004 ad spending marginally upward and offered his first predictions for 2005. Bob Coen, senior vice president-director of forecasting at Universal McCann said U.S. ad spending now is expected to climb 7.3 percent in 2004, 0.4 percentage points higher than his initial projection in December 2003. He improved his worldwide ad growth estimate to +6.0 percent, an improvement from December's 5.8 percent estimate, and a further affirmation that the U.S. will outpace worldwide ad growth. The upgrade also means that worldwide ad spending for the first time will pass the half trillion-dollar mark in 2004.

Coen also took his first stab at 2005, predicting U.S. ad spending would grow 6.5 percent and worldwide spending would rise 5.9 percent, which are considered healthy rates of growth following a so-called quadrennial year impacted by incremental Olympic and election year spending.

Coen said the advertising markets for most major media appear to be in a sustained expansion, and have essentially recovered from the rollback that occurred following the crash of 2001, that followed the implosion of Internet ad spending and the unparalleled traditional media ad growth of so-called "dot-com" brands.

In fact, Coen's biggest revision between December and June was for Internet ad spending, which he now predicts will expand 20.0 percent to $6.78 billion, double the 10.0 percent growth rate he predicted for the medium in December. While Coen's Internet numbers are much lower than some other leading forecasters, the revision is nonetheless impressive for a self-described "skeptic" of Internet advertising claims. Nonetheless, Coen said online media have emerged as an integral part of the media plans for most major marketers, noting, "Now they're getting into 2 to 3 percent of budgets."

An important driver in ad spending for all media, he said, was the reemergence of dot-com brands, which rose to a height of $5.6 billion in traditional media spending during 2000, only to crash to less than half that amount in 2001. But Coen said "the shakeout is over. They're coming back." At $2.65 billion in 2004, Coen estimated dot-com brand spending in traditional media would expand 20.0 percent this year, marking the first double-digit growth for the category since the Internet crash.

Dot-coms are not a traditionally classified ad industry category, but represent brands contained in other categories, include retailing, telecommunications and others. Nonetheless, if they were grouped as a separate category, Coen said they would now rank among the so-called "primary" ad categories that drive much of the industry's growth.

"They're about the size of fast-foods," he said. "It's not going to be Rx drugs, or food, but it's a pretty good size category out of nowhere." More importantly, unlike the undisciplined run-up by dot-com marketers during the Internet expansion, Coen said the categories expansion is sustainable.

"Dot.com" Brand Spending In Traditional Media

          Ad Spending    Vs. Prior Year 
1998   $0.654 billion              +77% 
1999   $3.086 billion             +372% 
2000   $5.597 billion
+81% 
2001   $2.662 billion              -52% 
2002   $2.150 billion              -19% 
2003   $2.210 billion               +3% 
2004   $2.650 billion              +20%

Source: Universal McCann.

In theory that, and the rebound of other key categories hit hardest by the economic recession, including travel and financial services, should benefit all media as they rebound, but Coen portrayed a relatively uneven expansion for various media in the marketplace, especially the major TV networks, which had been seen as leading the consumer media out of the recession, but which have now been revised downward, according to Coen.

In their place, he has considerably upgraded the outlooks for cable and syndicated TV, local TV and direct mail. The biggest downgrades went to network broadcast TV, national newspapers and Yellow Pages.

Original, Revised 2004 Ad Growth

Original*     Revised**         Change 
Big 4 TV Networks        +12.0%        +10.0%    -2.0 points 
National Spot TV          +9.0%         +9.0%             NC 
Network Cable TV
+12.0%        +14.0%    +2.0 points 
Syndicated TV             +9.0%        +13.0%    +3.0 points 
National Radio            +7.0%         +7.0%             NC 
Magazines
+5.0%         +5.0%             NC 
National Newspapers       +7.5%         +6.5%    -1.0 points 
Direct Mail               +5.0%         +6.5%    +1.5 points 
National Yellow Pages     +3.5%
+1.0%    -2.5 points 
Internet                 +10.0%        +20.0%   +10.0 points 
Other National Media      +7.0%         +7.2%    +0.2 points 
National Media Total      +7.4%
+8.3%    +0.9 points

Local Newspapers          +6.0%         +4.5%    -1.5 points 
Local TV                  +7.0%         +8.0%    +1.0 points 
Local Radio               +6.5%
+6.0%    -0.5 points 
Local Yellow Pages        +3.5%         +2.0%    -1.5 points 
Other Local Media         +7.2%         +8.2%    +1.0 points 
Local Media Total         +6.0%
+5.5%    -0.5 points

All U.S. Media            +6.9%         +7.3%    +0.4 points

Overseas Media            +4.5%         +4.8%    +0.3 points

Worldwide
Media           +5.8%         +6.0%    +0.2 points

Source: Universal McCann. *December 2003. **June 2004. NC = no change.