There are accumulating signs that advertising spending is resuming its growth after almost two years of deeply disappointing results. But Madison Avenue remains cautious: to paraphrase the old joke about economists, forecasters have predicted nine out of the last five upturns.
There were several signals yesterday that indicated improvements, which are being eagerly, even anxiously, awaited by Madison Avenue as agencies struggle to recover from their most severe cutbacks in decades. Among them were optimistic predictions for 2004 and 2005 from the Television Bureau of Advertising, the trade organization for local TV broadcasters, and a forecast for a strong gain this year from the chief economist at Standard & Poor's.
There was also an upgraded outlook for radio and outdoor-advertising industry stocks, which are significantly dependent on ad revenue, by an analyst at Merrill Lynch; better numbers for the first half and the full year from the trade organization for the billboard media, the Outdoor Advertising Association of America; and word of plans by a big advertiser, Kraft Foods, to spend an additional $60 million on consumer campaigns and promotions through the end of the year, to stimulate lagging sales.
"We think that advertising is on its way back," said David Wyss, the chief economist at Standard & Poor's, part of the McGraw-Hill Companies, who spoke yesterday at the ninth annual Forecast Conference sponsored by the television bureau.
"There is real strong growth, coming off a miserable 2001 performance and a weak 2002 performance," Mr. Wyss said. His estimate for this year calls for an increase in ad spending of 4.8 percent from 2002.
By comparison, ad spending in 2002 rose an anemic 2.4 percent from 2001 and actually fell, by 6.5 percent, in 2001 from 2000 - the first decline in 10 years and the largest in 63 years.
"It's not going to be exciting," Mr. Wyss said of the projected ad-spending gain this year when compared with the robust increases during the dot-com boom. "But the worst is, we think, over."
Among the media "coming back quicker" than others as ad spending rises, Mr. Wyss cited television and direct mail, and among those that are "lagging," he mentioned magazines.
Mr. Wyss's forecast of better days came after an encouraging report last week from TNS Media Intelligence/CMR, a division of Taylor Nelson Sofres that tracks ad spending. The report showed that ad revenue for 16 major media in the first half grew at a faster pace than had been expected, up 6.8 percent from the period a year ago. Also, this week, retailers and automakers - among the freest-spending local and national marketers - reported that sales in August exceeded previous estimates.
Still, the specter of false positives looms large on the horizon. For instance, another speaker at the conference, Robert D. Liodice, president and chief executive at the Association of National Advertisers in New York, the trade organization for marketers, warned that "consumer annoyance" threatened to reverse whatever gains might be in store.
"Let's face it," Mr. Liodice said, "there's a consumer revolt going on to reduce or eliminate advertising annoyances," which he described as being "at their peak."
Among the bêtes noires of consumers, Mr. Liodice listed spam, unwanted e-mail messages; clutter, the crowding of television programs, magazines and newspapers with a plethora of pitches; pop-up ads, which annoy visitors to Web sites; and interruptive telemarketing calls.
And in a report on his improved outlook for radio and outdoor stocks, the Merrill Lynch analyst, Marc E. Nabi, a managing director, acknowledged that "our industry upgrade could be early since we have witnessed several recovery `head fakes' during the advertising downturn."
This time, however, he wrote, "we would rather be early than miss the boat on these stocks." Mr. Nabi upgraded shares of four companies, to buy from neutral: Emmis Communications, Entercom Communications, Lamar Advertising and Radio One.
Within hours of the release of Mr. Nabi's report, the outdoor ad association announced that it would adjust upward its forecast of results for the year, after a second quarter and first half that exceeded expectations.
"We thought the year would be up about 4 percent," said Stephen Freitas, chief marketing officer at the association. "But now we think it will be up 5.7 percent." By contrast, 2002 ended for outdoor advertisers with a gain of only 0.8 percent from 2001. The increase in the second quarter from the period a year earlier was 3.9 percent and the increase in the first half from the period a year earlier was 5.3 percent.
Among the categories generating the gains, Mr. Freitas listed automotive accessories, auto dealers, financial services, insurance and real estate, local advertisers and restaurants.
"Reports from member companies indicate that second-half sales are strong," he said, "and we're pleased with early indications that ad spending will be brisk for the holidays."
The television bureau, with members at more than 500 local stations as well as advertising sales representatives and station groups, also adjusted its forecast upward. Previously, the bureau predicted that revenue for what is known as spot advertising would increase 7 percent to 9 percent for 2004. The new forecast is for gains of 10 percent to 11 percent, to be followed in 2005 by gains of 2 percent to 4 percent.
"We've had some terrible times since late 2000," Christopher J. Rohrs, president at the television bureau in New York, said at the conference, which drew about 350 people. But because "nothing influences our mass media more than the state of the overall economy," he said, the improving national economic outlook would also benefit local TV.
Also benefiting local TV, as well as national TV and magazines, will be the decision by Kraft, majority owned by the Altria Group, to add $60 million to its consumer ad and promotion budget for the remainder of 2003. In the last four months of 2002, TNS/CMR reported, Kraft spent about $160 million on advertising, out of total spending for the year of more than $750 million.
Top executives at Kraft, speaking yesterday at a conference in Boston, said that they would increase spending on products like coffee, cold cuts and cheese. Sales of many Kraft products have been hurt by competition from lower-price private-label and store brands.
Kraft will also add $140 million to its budget for domestic marketing, the executives said, for initiatives aimed at retailers.
Posted on aef.com: September 10, 2003
Stuart Elliott, The New York Times. September 5, 2003
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