Magna's Coen Downgrades U.S. Ad Spending Forecast

Overall, total ad spending in 2008, Coen projects, will now be $285.1 billion, up 2 percent over 2007.

July 8, 2008

 

Bob Coen, vp and director of forecasting for Magna, has downgraded his 2008 ad spending projections by  2.7 percent for national advertising and 4 percent for local spending, saying that the economy right now is worse than it appeared it would be back in December 2007 when he made his original 2008 projections.

 

Coen is now projecting that national ad spending in 2008 will total $193 billion, $5.5 billion less than he originally projected, while local ad spending will be $92 billion, down from the $95.8 he originally projected. Overall, total ad spending in 2008, Coen projects, will now be $285.1 billion, up 2 percent over 2007. He originally projected the overall ad spend in 2008 would be up 3.7 percent to $294.3 billion.

 

“Now it is apparent that things were even worse than many had expected at the close of last year,” Coen said in announcing his mid-year ad spending update today (July 8). “Economic expectations have seriously weakened compared to last December and consumers’ disposable personal income has failed to improve in recent months.”

 

Coen said that ad spending’s share of the U.S. Economy was just 2.02 percent in 2007, down 5 percent from 2007 the lowest percentage of share since 1981.

 

For the first four months of 2008, Coen said ad spending has been basically flat. Ad spending across all media by auto companies is down 9 percent during the first quarter of this year, compared to the same period last year, while pharmaceutical company spending is up 1 percent, restaurant and packaged food ad spending are up 5 percent each, while telecommunications and cosmetics company spending are flat. Movie company ad spending during the first quarter is down 1 percent and computer company ad spending is down 10 percent. While beer & wine advertising is up 8 percent, the soft drinks and snacks category is up 21 percent, insurance advertising is up 7 percent and apparel ad spending is up  4 percent.

 

Coen said airlines’ advertising is up 20 percent but a lot of that is to make consumers aware of new (higher) fares.

 

During the first four months, ad spending on the Big Four broadcast TV networks is virtually flat, up just 0.2 percent, while ad spending on cable TV is up 5.8 percent and ad spending in TV syndication is up 11 percent. Ad spending on the Internet in the first quarter is up 9.8 percent.

 

Media getting less ad dollars in first quarter include national spot TV, down 3 percent; national spot radio, down 11 percent; magazines, down 1.5 percent; and newspapers, down 9.5 percent.

 

Still, Coen is projecting solid gains for the broadcast networks, largely fueled by the Olympics on NBC, and for cable and syndication. Coen is projecting that the Big Four broadcast networks will take in $17.8 billion in ad revenue in 2008, up  7 percent over 2007. Cable, he said, will reach $22.2 billion, up 8 percent, while national spot TV will reach $11.5 billion,  up 10 percent, and TV syndication will be up 8 percent to $3.5 billion.

 

Coen says national radio advertising will decline by less than 1 percent to $4.2 billion, magazine ad revenue will be up 1 percent to $13.9 billion, and newspaper national ad revenue will be down 7 percent to $6.1 billion. The Internet is expected to take in $11.7 billion, up 12 percent, direct mail is expected to take in $61.7 billion, up  2.5 percent, while Yellow Pages ad spending is projected to be flat for 2008 at $2.1 billion.

 

Local TV is expected to be bolstered a little by the elections and is projected to be up by 4 percent in 2008 to $14.9 billion, but local ad revenues at newspaper are expected to decline by 8 percent to $32.6 billion, with classified advertising taking the biggest dip. For the first quarter of 2008, newspaper classified advertising is down 24 percent over the same period last year.

 

“The advertising industry is presently in a severe slump,” Coen said. “Eventually we expect the U.S. dollar to improve in value in contrast to other currencies and we expect some solutions  to the present economic problems, but no significant improvements are immediately likely.”

 

For 2009, Coen is projecting that total U.S. Ad spending will reach $294 billion, up 3.1 percent from 2008.