• by Joe Mandese  @mp_joemandese, January 5, 2005

Describing 2004 as "strong" and the outlook for 2005 as "steady," Carat Wednesday issued its final estimates for 2004 U.S. and worldwide ad spending, as well as a revised forecast for 2005. The revisions reflect stronger than anticipated results for the 2004 finale, but a slightly less robust outlook for 2005 than the media agency's previous expectations.

"The global recovery is now solid, with good macro-economic drivers," notes the report, emphasizing that "economic growth slowed in the second half of [2004], but advertising remained largely unaffected, and growth rates are back to the pre-recession levels of 1999."

Carat boosted its final worldwide ad growth estimate for 2004 to 6.0 percent, up from the 5.7 percent it projected in September. The U.S. ad growth rate remained the same at 5.8 percent.

As for 2005, Carat issued a more cautionary note, revising its worldwide projection down to a 4.9 percent growth rate (from 5.0 percent in September) and its U.S. projection down to 4.5 percent (from 4.8 percent).

"Potential causes for concern in 2005 relate to the price of oil, the weakness of the dollar and the U.S. current account deficit but so far the market outlook remains healthy," warned the agency, adding however, that it has "no indication of advertisers significantly cutting down on their media expenditure."

Online continues to be the biggest media growth engine, followed somewhat surprisingly by outdoor media, the agency said. Carat predicted Internet ad spending would rise 20 percent in both 2004 and 2005, increasing its share of global ad budgets.

"The Internet's share of global ad spend is currently 3%, but this is expected to increase substantially in the next few years as the medium becomes an essential part of the marketers' armoury," said the agency, a unit of U.K.-based Aegis Group.

As for outdoor media, Carat said the sector continues to thrive due to new formats and methods of audience measurement, as well as its ability to maintain its place in a media universe that is fragmenting around it.

"Outdoor is least impacted by the fragmentation of media and the move towards digital delivery should boost the sector. We anticipate that the strongest area of competition in the next few years will be the growth of in-store digital delivery," predicts the media shop.

Carat's Revised U.S., Worldwide Ad Forecast

             -2004 Ad $ Growth-      -2005 Ad $ Growth- 
             Revised   Previous      Revised   Previous 
Global
+6.0%     +5.7%        +4.9%      +5.0% 
USA             +5.8%     +5.8%        +4.5%      +4.8% 
Asia Pacific    +6.2%     +6.2%        +5.8%      +5.8% 
Europe          +4.8%     +4.4%
+4.4%      +4.4% 
UK              +6.4%     +4.6%        +4.6%      +4.3% 
Germany         -1.0%     -1.0%        +1.3%      +1.3% 
France          +3.0%     +3.2%        +2.2%      +1.9%

Italy           +6.5%     +5.7%        +3.3%      +3.3% 
Spain           +5.0%     +4.0%        +4.5%      +4.2% 

Source: Aegis Group PLC, Jan. 5, 2005. Previous forecast issued in September 2004.