The media executive widely deemed the dean of ad-spending forecasters yesterday deflated some of the growing optimism about a recovery this year.
The executive, Robert J. Coen, senior vice president and forecasting director at Universal McCann in New York, revised downward his estimate for ad spending growth in 2002, partly because of the wave of corporate scandals and the continuing decline in stock prices.
So even as many forecasters adjust their predictions upward, Mr. Coen now estimates that American ad spending will grow just 2.1 percent in 2002, compared with the 2.4 percent increase he announced in early December.
The predictions of Mr. Coen are closely followed because he has been tracking ad spending since 1948. Last fall, he was one of a handful of forecasters who predicted ad spending in 2002 would increase from 2001, when advertisers cut budgets for the first time in a decade.
The credibility accorded Mr. Coen's predictions was demonstrated yesterday when the stock price of Viacom, one of the most advertising-dependent of media companies, dropped 11.5 percent, partly in reaction to his new forecast.
"We're still expecting to see some improvement unless something comes up and bites us," Mr. Coen said yesterday morning at a presentation in Midtown Manhattan sponsored by Universal McCann, part of the McCann-Erickson World Group, and the parent, the Interpublic Group of Companies. "But things are coming along slower than we expected, and the stock market problems are a major cause."
"It's more of a psychological effect than absolute," he added, "but it's still impacting on all advertising demand." If consumers are not confident, they will not spend, and if consumers are not spending, marketers will not spend their ad budgets.
Karen R. Ficker, managing director at Advance Consulting in Morristown, N.J., who attended Mr. Coen's presentation at the University Club, said: "Directionally, we're headed the right way. But you need to have corporate confidence that a real economic recovery is under way before advertisers start launching new products they've been delaying."
Mr. Coen said decreased spending by brokers and marketers of mutual funds was one reason he reduced his estimate for 2002 ad spending to a total of $236.2 billion, down from his December estimate of $239.3 billion. Data he compiled for the first quarter showed spending by those advertisers had fallen 31 percent from the first quarter of 2001 — the sharpest decrease for any nontechnology category.
"With consumer trust such an important issue, companies in the financial category have a wait-and-see attitude" about their ad budgets, said Kathy Kayse, publisher of Money magazine in New York, part of Time Inc., owned by AOL Time Warner. "The dollars are not coming back as quickly as they might have."
Through May, Money's ad pages had declined 32 percent from the first five months of 2001. "By the year-end, I'm anticipating being down 12 to 15 percent," she added, partly because "the comparisons will get easier" between the fourth quarter of this year and the fourth quarter of 2001, when advertisers sharply reduced spending after the terrorist attacks.
Mr. Coen also attributed his decision to reduce his ad-spending forecast to a reluctance among advertisers in big categories like food, computers, airlines and apparel, along with a softness in demand for help-wanted ads in local newspapers; commercials on national cable television networks; and ad pages in national magazines.
Counteracting that downward pull, Mr. Coen predicted, will be ad-spending increases in national media like broadcast network television and radio, as well as local media like yellow pages. Categories like automobiles, beer and wine, beverages and snacks, movies, restaurants and telecommunications, should also post gains, Mr. Coen said.
Mr. Coen's projected increase for 2002 of 2.1 percent is composed of a gain of 1.9 percent in national advertising, down from the 2.5 percent he forecast in December, and a gain of 2.4 percent in local advertising, up from the 2.3 percent he forecast previously.
Turning to ad spending overseas, Mr. Coen predicted 2002 would end with a total of $214 billion, up 2.1 percent from $209.6 billion in 2001. In December, he forecast a total of $226.8 billion for 2002 ad spending outside the United States.
Mr. Coen's estimated total for worldwide ad spending this year is now $450.2 billion, which would be an increase of 2.1 percent from $440.9 billion in 2001.
In his first forecast for ad spending for 2003, Mr. Coen said he saw a return to more historically typical growth levels because "we're in a good recovery" of the general economy that "should carry over quite well into 2003."
Mr. Coen is predicting an increase in worldwide ad spending next year of 5.5 percent, to $475 billion. That is composed of identical 5.5 percent gains in the United States — to $249.2 billion, which would break the record set in 2000 — and overseas, to $225.8 billion.
Mr. Coen's forecasts of higher ad spending this year had been welcomed by Madison Avenue because ad spending last year fell 6.5 percent, to $231.3 billion from the record $247.5 billion spent in 2000. That downturn was the largest since a decline of 8.1 percent suffered in the Depression year of 1938.
"When everyone else said `down' in December, he saw there would be a recovery and said `up,' " said Leland A. Westerfield, a media analyst at UBS Warburg in New York, who attended the presentation.
Mr. Westerfield's forecast for 2002 is for a gain of 1 percent compared with Mr. Coen's 2.1 percent. David Peeler, president and chief executive at CMR, the division of Taylor Nelson Sofres that tracks ad spending, recently revised his forecast upward, to a gain of 2.5 percent from a gain of 1.5 percent. Lauren Rich Fine, analyst for Merrill Lynch, also recently revised her forecst upward, to an increase of 0.4 percent from a decrease of 1.5 percent.
"It's all fine tuning," said Alan J. Gottesman, an analyst at West End Communications/Consulting in New York, who also attended the presentation. "The business has been down so long, this looks like up to me."
STUART ELLIOTT, The New York Times. July 11, 2002
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