Coen reduced his projected national advertising total from a 7.4 percent increase--to $178.2 billion--to an increase of 6.5 percent, to $177.9 billion. He also lowered his local ad spending total from a projected 4.8 percent hike to $102.3 billion, down to a 4.3 percent rise to $100.8 billion.
Some of the reasons Coen offered for setting his sights lower vis a vis ad spending include the effects of the Sarbanes-Oxley financial reporting regulations, which Coen asserted may have added to the persistence of conservative and cautious spending practices. Also, the stock prices of most national marketers are still 10 to 15 percent below their peak levels back in 2000--and even the slightest hint of any problems tends to take its toll, Coen noted.
Furthermore, new accounting rules and regulations have had an effect in the area of promotional advertising spending--where discounts and special promotions, and the advertising that accompanies them, have been cut back or not employed at all for fear of SEC problems, he said.
"All of these forces, and possibly others, have combined to slow the pace of advertising growth for U.S national marketers," Coen said. "The strong re-expansion in national advertising growth that was expected last December has not developed so far this year. A number of unique developments appear to explain what is happening rather than a single, across-the-board shift in the advertising strategies of most national marketers."
The state of the advertising spending strategies of the smaller local marketers has been stagnant in recent years, Coen said. The traditional media--newspapers, radio, and television--have seen spending by local marketers erode despite improved business conditions.
As for the reasons behind that, consolidations of retailers--such as drugstores, hardware stores, and others, have reduced the number of local advertising prospects for many media.
"Many of the new giant retailers like Wal-Mart and CVS are concentrating heavily on building store traffic by offering the lowest possible prices to their local consumers, forgoing any form of joint cooperative advertising efforts and focusing just on the lowest possible price for the products of national manufacturers," Coen said. "Many local advertisers now concentrate on the use of pre-printed inserts, highly targeted mail advertising programs, and increased spending for online marketing efforts that are more transactional than persuasive in nature."
Eventually the pendulum should swing back to the use of a broader range of inducements other than price alone, Coen said. "We had expected relatively weak year-over-year growth in the opening months of this year but expected gradual improvement as the year unfolded," he said. "The economy has been on track, but the advertising trends have failed to improve enough to raise full-year advertising growth into line with economic growth. Instead of advertising growing faster than nominal [Gross Domestic Products] in 2005 as we believed back in December of last year, we now expect that advertising's outpacing of economic growth will be delayed until 2006."
As for that year, Coen was again expressing bullishness. His initial forecast for 2006 is that U.S. ad spending will grow 5.8 percent to $290 billion.
Coen also struck a positive note about dot.com marketers, which he said are continuing to increase the amounts they spend for ads in traditional media. Ad spending on the Internet will be up 15 percent to $7.8 billion, he said.
In 2004, Coen said, 51.3 percent of Internet marketers' total budgets went for banner and other types of Internet ads, and the balance for consumer media advertising. However, Coen said, in the first quarter of 2005, spending for traditional consumer advertising grew somewhat faster than budgets on the Internet.
"A review of some of the largest and most important Internet advertisers suggested that online spending for traditional advertising on the Internet has slowed considerably," Coen said. "For example, in the first quarter of 2004, online advertising for the retail category was up 15 percent, and in the first quarter of 2005, down 13 percent. In 2004, department stores were up 24 percent, but in 2005, down 70 percent. Since these reported numbers do not include text-only search-related services, it seems likely that monies are being diverted to these transaction-facilitating services. Advertising dollars are possibly being diverted to other marketing communication activities."
Overall, here's what Coen had to say about the 2005 spending outlook broken down by category:
Big Four TV networks will rise 2 percent to $17 billion; spot TV will be down 5 percent to $10.8 billion; cable TV will grow 12 percent to $18.3 billion; syndication TV will be up 4 percent to $3.8 billion; radio is expected to grow 5 percent to $4.5 billion; magazines look to be up 7.5 percent to $13.1 billion; newspapers should be up 5 percent to $8 billion; direct mail should rise 8.5 percent to $56.6 billion; Yellow Pages are likely to rise 3 percent to $2.1 billion; and the Internet will be up 15 percent to $7.8 billion.
All other national media will be up cumulatively 5.9 percent to $35.5 billion.