• by Joe Mandese , December 12, 2007

Overall U.S. ad spending in the major measured media crept up modestly during the third quarter of 2007, reversing a year-to-date recession, but the bump was due largely to a 2007 calendar-related phenomenon that added an extra week to the third quarter this year, suggesting the all important fourth-quarter results ultimately will look weak by comparison. Even with a rise in third quarter ad spending, the top economist at ad industry tracking firm TNS Media Intelligence says underlying conditions remain volatile and the advertising marketplace will get weaker before it gets stronger again. Citing underlying problems in the housing market, the sub-prime credit/mortgage marketplace, and infrastructure problems in many top advertising categories, Jon Swallen, senior vice president-research at TNS MI, said "there's still a significant risk for the advertising market going into 2008."

The dour prediction comes amid downward revisions released last week by many of the industry's top forecasters, and systemic problems in advertising demand for many major media, especially big traditional outlets like newspapers, radio and broadcast TV. And despite turning in surprisingly strong third quarter results - due largely to a tighter than expected scatter marketplace - the major broadcast networks are experiencing a major shortfall during the fourth quarter as the shift to time-shifted "C3" ratings, and the impact of the television writers strike diminishes their supply of saleable inventory, forcing at least one major television network, NBC, to take the unusual step of giving some advertisers cash instead of so-called "makegood" inventory for under-delivery on the upfront ratings guarantees.

"That's never a good sign," said Swallen, because unlike makegoods, cash-back deals mean money is leaving the network advertising marketplace and may not return. He said sales for the major TV networks were better than expected for September, but he noted that likely was due to the start of a new TV season, and the fact that September had five calendar weeks this year, vs. four last year, meaning they will be down another week when fourth quarter results come in.

That's not good news for the major broadcasters, who have already been hammered by a protracted TV writers strike, the shift to Nielsen's new C3 ratings, and a continuing migration of viewers and advertisers to other electronic media options, especially the Internet. While TNS MI does not track fast-growing forms of online advertising like search, data on Internet display advertising proves it to be the fastest growing of the major media during the first three quarters, rising 17.2% to $8.4 billion by TNS MI's estimates. That compares with an overall growth rate of just 0.2% for all the major media measured by TNS MI year-to-date, which is more likely flat after factoring for the calendar vagaries of the extra week of advertising sales during the third quarter.

And while consumer magazines continue to post strong results - rising 6.4% year-to-date - the methods used by the Publishers Information Bureau to estimate consumer magazine ad revenues are based on published rate cards that most likely don't reflect the actual discounting taking place in consumer magazine ad rates.

Meanwhile, Swallen, who has begun working on TNS MI's own revised forecast, which will be released early next year, says the picture does not appear to be improving for 2008, other than the positive impact incremental ad spending from the Olympics and the elections are expected to have. The elections are expected to contribute $2.5 billion in U.S. ad spending next year. And the incremental impact is likely to boost U.S. ad growth by a couple of percentage points. Beyond that, Swallen says many top advertising categories remain shaky, and the ultimate test will be the overall economy and consumer confidence, and how that impacts the growth of key consumer advertising categories.

Measured Advertising Spending by Media: Jan-Sep 2007 vs. Jan-Sep 2006¹

Source: TNS Media Intelligence

1. Figures are based on the TNS Media Intelligence Stradegy™ multimedia ad expenditure database across all TNS MI measured media, including: Network TV; Spot TV; Cable TV (45 networks); Syndication TV; Hispanic Network TV; Consumer Magazines (210 publications);,Sunday Magazines (5 publications); Local Magazines (30 publications); Hispanic Magazines (30 publications); Business-to-Business Magazines (356 publications); Local Newspapers (145 publications); National Newspapers (3 publications); Hispanic Newspapers (52 publications); Network Radio; Spot Radio; Local Radio; Internet; and Outdoor. Figures do not include public service announcement (PSA) data.

2. Network TV figures include the CW and MyTV networks, both of which launched in Sept 2006.

3. Spot TV figures do not include Hispanic Spot TV data.

4. Magazine media includes Publishers Information Bureau (PIB) data

5. Internet figures do not include paid search or broadband video advertising.

6. Local Radio includes expenditures for 34 markets in the U.S. as provided by Miller Kaplan Arase

7. FSI data represents distribution costs only.

8. The sum of the individual media may differ from the sub-totals or grand total due to rounding.

Share of Measured Advertising Spending by Media:

Jan-Sep 2007 vs. Jan-Sep 2006

Source: TNS Media Intelligence

Note: The sum of the individual media may differ from total due to rounding

Top Ten Advertising Categories: Jan-Sep 2007 vs. Jan-Sep 2006

Source: TNS Media Intelligence

Note: Figures do not include FSI or PSA activity. The sum of the individual categories may differ from the total due to rounding.

¹ Misc Retail does not include these retail segments: Department Stores, Food Stores; Home & Building Supply Stores