The downgrade is the latest in a series of downward revisions issued by other leading industry forecasters and suggests that some fundamental shifts are taking place in the industry's economics, as advertisers continue to shift money out of traditional media and into new and emerging media platforms, especially online.
The fastest growing of the major media tracked by Coen -- and the only one projected to rise at double-digit rates -- is the Internet, which he predicts will rise 15%, to $10.715 billion, in 2007. That's about three times the 5.9% rate of growth of the overall national media marketplace, and it doesn't even factor in some of the fastest growing areas of online advertising, including search, social networks and online video.
Those and other emerging platforms -- such as mobile marketing, video games, advanced television, and digital out-of-home networks -- will actually grow at double the official online rate, rising 31.7% in 2007, according to a companion forecast presented Tuesday by Brian Wieser, SVP/director of industry analysis at Universal's sister agency Magna Global.
The side-by-side forecast presentations were a symbolic counterpoint, with Coen representing the old world of the advertising economy and Wieser the new one, which some believe may be responsible for sucking some of the wind out of traditional advertising spending.
Asked what the real growth rate would be for the overall advertising economy if the emerging platforms were factored into the total equation, Coen said it could add as much as a half a percentage point to the industry's growth. "Instead of that figure being 3.1% it might be 3.5% or 3.6%," he said.
But the changes taking place in advertising spending aren't simply a shift from old media to new, said Magna's Wieser, but an even more fundamental redeployment.
"What's actually happening, I would argue, is advertisers are shifting their money out of media that we define as ad-supported media into marketing," said Wieser, adding, "And it's very difficult to measure that."
Some of that spending is going into so-called "below-the-line" marketing services like direct response and promotion that aren't classified as advertising budgets, while others are going into new media platforms that have yet to be classified.
Coen, who has been a fierce champion of the classic definition of advertising, acknowledged Tuesday that it might be time to redefine its meaning to encompass new media and new methods of marketing communications.
In fact, Wieser noted that many of the fastest growing of the emerging platforms still haven't figured out how to "monetize" their reach in terms of advertising revenues. For example, he estimated that for all their growth, online social networks would take in only about $685 million in advertising revenues this year. While that's up a whopping 148% from the $276 million advertisers spent on social networks in 2006, it's still only a fraction of their relative growth in terms of share of total Internet page views. Wieser estimated that the page views of social networks would rise nearly 99% this year vs. only 2.6% for total Internet page views.
He also predicted that social media ad spending would top $1 billion next year, rising 48.9% over 2007.
Similarly, online video is growing rapidly, but still is a relatively small share of total ad spending. With an estimated $365.5 million in ad sales during 2007, online video will grow 55.5% over 2006, but will still account for less than 1% of the total TV advertising marketplace. Wieser projected that online video advertising spending would rise 53.2% to $560 million in 2008.
While still small in the context of the total advertising marketplace, these emerging media nonetheless will continue to outpace the overall advertising economy by a wide margin. According to his first estimates for 2008, Coen expects U.S. ad spending to rise only 5.0% to $305 billion in 2008.