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Forcasting Ad Spending for the Coming Year

Remember the old jingle for Alka-Seltzer promising that "relief is just a swallow away?" Well, two leading forecasters of advertising spending warned Madison Avenue yesterday that much gulping would be required before a turnaround slowly begins.

Relief is almost a year away, said the forecasters, John Perriss and Robert J. Coen, who offered their downbeat predictions at the opening session of the 29th annual UBS Warburg Media Week conference in Midtown Manhattan. Even so, they said, conditions were unlikely to deteriorate before then.

"This is as bad as it gets on a global basis," said Mr. Perriss, chief executive at the Zenith Optimedia Group in London. "We think we're now at the bottom of this particular cycle."

It was the third time in a year that each forecaster had lowered estimates for ad spending as economies in important markets like Britain, France and Germany deteriorated almost immediately after marketers started cutting ad budgets in the United States.

Their estimates are in line with others made recently as the advertising industry searches for signs of a recovery after a miserable year. Ad spending is usually watched carefully as an indicator of the strength or weakness of the economy.

"The economy at the end of the year 2002 will certainly be a lot stronger than it is now," said Mr. Coen, senior vice president and forecasting director at Universal McCann in New York, part of the McCann-Erickson World Group division of the Interpublic Group of Companies.

Until then, he said, worldwide ad spending this year will fall 1.7 percent from 2000, to $456.1 billion from a record $463.9 billion, bringing the first global decline in advertising "since the World War II days."

In the United States, Mr. Cohen estimates ad spending in 2001 of $233.7 billion, down 4.1 percent from $243.7 billion in 2000. This would be the first decline since 1961 and the largest decline since 1938. Overseas, he expects ad spending of $222.4 billion, up only 1 percent from $220.2 billion in 2000.

"It was tough for anybody in the advertising industry," Mr. Coen said. Among reasons for the decline domestically, he added, were huge cutbacks in ad spending by dot-coms, to $2.4 billion this year from $5.6 billion last year, along with the "terrible state" of important categories like telecommunications, computers, brokerage firms and airlines.

For 2002, Mr. Coen is predicting a worldwide total of $466.1 billion, up 2.2 percent from 2001. That breaks out as follows: United States ad spending of $239.3 billion, up 2.4 percent from 2001, and overseas ad spending of $226.8 billion, up 2 percent from 2001.

Two factors that will stimulate ad spending in this country in 2002, Mr. Coen said, are the Winter Olympics in Salt Lake City and the competitive Congressional races next fall.

"If you're way outspent by your opponent, you're not going to win the election," he added, alluding to the New York City mayoral contest last month, in which Michael R. Bloomberg spent $69 million and won.

As a percentage of gross domestic product, Mr. Coen said, ad spending, which reached a record 2.45 percent last year, will fall to 2.28 percent in 2001 and 2.27 percent in 2002.

Mr. Perriss said that "better times" would arrive "from the back end of 2002 going into 2003." After a decline in worldwide ad spending this year of 3.4 percent from 2000, he added, there will be a slight increase in 2002, of 0.8 percent.

"Next year will be better," Mr. Perriss said, "but not a boom." Unlike the decline in ad spending, which was unparalleled in its rapidity and scale, he said, the recovery will gather momentum gradually, with increases in worldwide ad spending of 3.6 percent in 2003 and 5.3 percent in 2004.

Mr. Perriss's forecast differs from Mr. Coen's in that Mr. Perriss estimates there will be two consecutive years of declining ad spending in the United States, with decreases of 6 percent this year and 1.5 percent next year. Mr. Perriss then forecasts increases of 1.6 percent in 2003 and 4.3 percent in 2004; Mr. Coen made no predictions beyond 2002.

As if to underscore the grimness of the current situation, the Cordiant Communications Group in London, which owns Zenith Optimedia jointly with the Publicis Groupe in Paris, lowered its 2001 revenue forecast yesterday for the second time in two months, to a decline of 9 percent from a decline of 5 percent. Cordiant also announced a work force reduction of more than 1,100, or 11 percent.

"With 2001 in decline in virtually all corners of the globe, a recovery is set in late 2002 or 2003," said Leland A. Westerfield, a media analyst at UBS Warburg who attended the forecasters' presentations.

"In the near term, the chasm is still quite deep," he said, so "I couldn't see it sooner."

When ad spending improves, Mr. Westerfield said, media like the largest broadcast and cable television networks and radio will probably recover first, followed by magazines and newspapers.

Another analyst, Jack Myers, also adjusted his forecasts yesterday. Mr. Myers, chief economist at Myers in New York, which publishes media and research newsletters, now estimates American ad spending this year will fall 6.8 percent from 2000, rather than 6.6 percent, and fall 5.7 percent in 2002, rather than 6 percent. For 2003, he predicts an increase of 1.2 percent, and for 2004, he predicts an increase of 3.5 percent.


STUART ELLIOTT, The New York Times December 4, 2001

Copyright © 2001 The New York Times Company. All rights reserved.