• by Joe Mandese  @mp_joemandese, April 19, 2005

One of the world's biggest media buyers Monday revised its outlook for U.S. ad spending upward, especially for two of the newest media: online and cinema advertising. Both of those media are now expected to grow at much higher rates than the overall advertising economy through 2007, and much of their growth will come at the expense of traditional media, especially broadcast TV, Publicis' ZenithOptimedia Group predicted in its updated forecast.

In fact, the agency, which in recent years has tried hard to position itself alongside Interpublic's Universal McCann unit as a leading ad industry forecaster, now predicts the 2005-06 network upfront will be "relatively soft," citing volatile economics among many top network advertisers and the fact that the network scatter market has been "tepid."

"Telecom and retail mergers, government scrutiny, high oil prices and the weak dollar have led advertisers such as Procter & Gamble, Pfizer, Merck, and Kraft to exercise cancellation options at generally higher rates this year for most dayparts and venues," note the agency's report, which predicts network TV ad spending will climb only 3 percent in 2005.

By contrast, ZenithOptimedia expects online ad spending to increase 9.5 percent in 2005 and will rise 12 percent in 2006, up a percentage point from an earlier forecast of +11 percent. The agency said online should do even better in 2007, rising 15 percent over 2006, due largely to the medium's ability to "geo-target," which would "increase retail messaging online."

Meanwhile, consumer brands continue to flock online with general market advertisers allocating larger budgets to it "after having tested the medium in the past few years," the report said, adding that online also continues to benefit from increased direct response and brand advertising spending.

In fact, online is now estimated to account for 5.4 percent of all U.S. ad spending, making the U.S. the most concentrated online ad marketplace of any nation with the exception of Sweden, where it has a 7.7 percent ad market share.

Other non-traditional media, especially cinema advertising and new forms of out-of-home media, are expected to outpace overall ad spending through 2007, the agency said, predicting a relatively modest growth rate of 4.3 percent for the major media ad expenditures in 2005, a 0.1 percent improvement from its last forecast.

Aside from newer media, cable TV is expected to grow the fastest, rising 9.0 percent over 2005. Spot TV is projected to rise only 1.0 percent, radio 2.1 percent, though consumer magazines appear to have turned the corner. ZenithOptimedia predicts consumer magazine ad spending will rise 7.0 percent in 2005 and 8.0 percent in 2006, a much greater rate than their B-to-B counterparts, which will rise 2 percent and 3 percent, respectively in 2005 and 2006, as business marketers shift more of their budgets to online media.