Report Finds Only Cable, Internet Have Real Ad Growth

  • by February 28, 2006
Almost two months into the New Year, Merrill Lynch said the only medium showing any real advertising growth is the Internet--and, to a lesser extent, cable TV networks--as the brokerage house retained its moderate stance toward projected 2006 ad expenditures.

Merrill said it was standing by its previously released estimate of 4.6 percent growth in U.S. ad expenditures from 2006, which compares conservatively with a 5.8 percent growth estimate from Interpublic's McCann-Erickson and a 5.1 percent estimate from Zenith, a Publicis unit.

Merrill Lynch analyst Lauren Rich Fine also wrote that ad spending by the automotive industry was a wild card that made any projections risky at best.

"We expect volatility by medium by month as the domestic auto manufacturers try to reduce their overall ad expenditures," Fine wrote. "Clearly, they are moving more spending online, but at the same time they haven't abandoned traditional media--instead, they seem to be moving money around. The expected pressure on auto expenditures is one of the reasons we believe there is risk to the ad outlook."



The Internet is expected to show the most significant growth--increasing an estimated 27.4 percent in 2006 compared to the previous year, according to Merrill Lynch. Ad spending on cable TV networks was projected to increase 7 percent, the second highest of all categories. The lowest increases were predicted for Yellow Pages advertising (1.4 percent) and newspapers (2 percent)

In her report, Fine also suggested that so-called "big event" television like the Super Bowl and the Olympics are not all they are cracked up to be as far as advertisers are concerned, but she made an interesting prediction regarding the upcoming March 5 Academy Awards telecast on ABC.

"Unconfirmed reports that ABC sold last-minute Super Bowl inventory at a discount combined with weak NBC Olympics ratings suggest that some of the heretofore big events worth paying up for are not as compelling as in the past," she wrote. "Our money is on Jon Stewart and the Oscars, but is that a surprise to anyone?"

The report also pointed out that even the Internet was not immune from the vagaries of the media marketplace.

"A couple of Internet advertisers have indicated that the return on their search expenditures had been hurt by higher keyword pricing in the fourth quarter," Fine wrote. "A DoubleClick report indicated that it could have been due to the higher minimum bids instituted by Google. We believe it is more a function of supply and demand for specific categories with particular seasonality. Further, as less sophisticated marketers enter the fray, this could happen more often. As a highly liquid market, the on-line paid search market should correct quickly, in our view."

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