• by Joe Mandese , December 6, 2005

Portraying the U.S. and world advertising economies as far more volatile and unpredictable than they had thought, the world's leading advertising seers issued dour final forecasts for 2005, but somewhat more upbeat outlooks for 2006, during the opening day of an influential, week-long Wall Street conference on the media business.

"I would describe the current advertising market as unsettled," summed up David Poltrack, executive vice president-research and planning at CBS, one of the presenters during Monday's session of UBS' Media Week conference in New York, where he revised his year-ago projection of a 2.5 percent increase for network TV ad spending in 2005 down to a gain of 1.5 percent, and indicated that his relatively rosy 2006 projection for a 7.0 percent increase was dependent on the health of next year's quarterly "scatter" markets.

Top Madison Avenue forecasters, including Universal McCann's Bob Coen and ZenithOptimedia's Steve King, also revised their 2005 estimates downward due to a confluence of factors ranging from continuing caution among major marketers to spend, the influence of corporate procurement departments, the impact of the Sarbanes-Oxley financial disclosure act, and especially rapid changes in technology that are displacing many conventional media decisions. As a result, Universal's Coen said ad industry growth failed to keep pace with the relatively healthy growth in the U.S. economy.

Coen revised his 2005 U.S. ad growth estimates down to 4.6 percent from its previous forecast of 6.4 percent, though Coen predicted the U.S. ad economy would expand 5.8 percent next year.

ZenithOptimedia, meanwhile, revised its U.S. ad growth estimates down to 5.1 percent from an earlier forecast of 5.7 percent, despite larger than expected growth in online ad spending.

That was the overall theme among the experts: More moderate overall ad spending, with most of the stimulus being fueled by accelerated online ad spending coming at the expense of traditional media, especially television (see related story in today's MDN.

But as destabilizing a factor as technology has been on media - causing at least one expert, ZenithOptimedia's King, to suggest it might actually "threaten to undermine the free television market in the developed world" - others foresee a new tech-related advertising boon spurred by the introduction of new products such as Microsoft's new operating system, and a slew of new video game platforms and software titles.

"We see it coming in the near future," said CBS' Poltrack, who nonetheless said the impact of new tech category and product launches remained "the big unknowns."

That could be a make or break proposition for the broadcast networks, Poltrack implied, noting that due to a relatively weak upfront marketplace that forced the networks to hold back more of their ad inventory than normal, "We're sort of betting on the scatter market. We don't have these gains locked up in the upfront market."

If a new tech boom is going to manifest, it hasn't shown signs yet. According to Coen's tracking of major advertising categories, computer ad spending was down 20 percent through the first nine months of 2005, while the telecommunications category was flat.

The biggest ad categories - automotive and drugs/remedies - meanwhile have declined 2 percent and 1 percent, respectively, and Coen said that unless something happens to markedly change conditions they are likely to continue to drag on the U.S. ad economy next year.

New technologies are also radically changing the way Madison Avenue thinks of advertising, said Coen, conceding that he is still "trying to understand the Internet. This is evolving." Referring to "search and these other things," Coen added, "I'm not sure these new technologies are really advertising."