• by Joe Mandese , July 5, 2005

While the advertising economy continues to register mixed signals, including a procession of downgraded spending forecasts, media buying and planning services have emerged as the bright spot for the world's leading advertising organizations. That was evident last week, when one of the largest, WPP Group, reported especially strong results for its "media investment management" services for the first five months of 2005. It was also evident Monday, when Aegis Group, the world's largest pure-play media services company, issued a preliminary first half outlook.

Though its final first half results won't be released until Sept. 6, Aegis, the parent company of Carat, Isobar and Synovate, indicated its media planning and buying units are performing well in most markets, especially in Asia-Pacific and certain parts of Europe. Unlike recent downgrades from Interpublic's Universal McCann and Publicis' ZenithOptimedia Group, Aegis said "U.S. marketing spend continued to rise in line with expectations," and noted that there has been "sustained growth" in its online media operations.

Last week, Universal McCann Forecaster Bob Coen downgraded his projection for 2005 U.S. and worldwide ad spending growth to 5.7 percent from a previous forecast of 6.4 percent. The revision followed a series of similar cuts by other leading forecasters including Merrill Lynch's analysts and ad tracker TNS Media Intelligence.

On Monday, ZenithOptimedia slashed its forecast for 2005 U.K. ad growth to 2.9 percent from 4.9 percent due to a "steep" drop in demand during the first half of the year, according to a report by Reuters. The media agency also downgraded its 2006 ad growth estimate to 4 percent from 4.5 percent, and dropped its 2007 growth outlook to 3.8 percent from 4.4 percent.

But while overall ad demand appears to be ebbing, there is some good media news for both marketers and agency holding companies. For marketers, the downward pressure is leading to lower rates of media price inflation. While that could put a strain on the profits of media companies, Merrill Lynch analyst Lauren Rich Fine said in a report issued last week, it would likely lead to some reallocation of ad dollars to media with "more measurable marketing activities," especially the Internet, which she said would "put pressure on ad rates."

Meanwhile, media services continue to be the bright spot for some big agency holding companies.

"Media investment management continues to show the strongest growth of all our communications services sectors, along with direct, Internet and interactive and healthcare communications," WPP Chairman Martin Sorrell said in a statement released during last week's annual meeting. "Direct, internet and interactive related activities now account for almost 15 percent of the group's revenues, which are running at the rate of approximately $10 billion."

He noted that WPP's advertising and media investment management was up over 25 percent, which is a much higher rate of growth than any of its other communications service sectors. By comparison, WPP's research and consulting operations grew 16 percent, its PR operations rose 14 percent, and its branding, identity, healthcare and specialist communications units grew nearly 20%.

"On a like-for-like basis the combined revenue growth of media investment management and information, insight & consultancy was almost 11%, twice the rate of growth seen at some competitors," said Sorrell.