Print-based advertising expected strong in '05

U.S. advertising spending is expected to increase 6.4% to $280.6 billion in 2005 and grow faster than the economy for a second straight year, according to Robert Coen, senior v.p. of Universal McCann, in his latest forecast. This would follow a gain of 7.4% in 2004, which had "extra stimulus" from the U.S. election and summer Olympics, he said.

Even without those special factors next year, "there are many reasons to be optimistic about the immediate future," Coen said. "Marketers have been hoarding their resources while needs for greater marketing communications efforts keep piling up," he noted. "As uncertainties and extreme cautiousness diminish, marketers will shift attention away from cost cutting to rebuilding brand positions and (growing) their total company market share."

Coen expects national advertising in all U.S. media to increase 7.4% in 2005, while local advertising increases 4.8%. The overall growth of 6.4% in U.S. advertising would be higher than the expected 5.8% in nominal gross domestic product (GDP), not adjusted for inflation. He said this is not surprising since advertising typically lags economic growth and then picks up momentum in later stages of the recovery.

Advertising as a percentage of GDP improved to 2.27% in 2004 from a low of 2.23% in 2003. He said the ratio could reach 2.5% by the end of the decade-or close to the peak reached in 2000 during the internet-fueled economic boom.

Print-based media are expected to receive a respectable share of next year's projected growth, according to his forecast. Direct mail is expected to show the fastest growth, increasing 9.5% to $57.2 billion in 2005, following an 8% increase in 2004.

He said direct mail has benefited from the "Don't Call" restrictions on telemarketing. Direct-mail marketing fell off sharply in the first half of 2002 following the "anthrax" scare and terrorist attacks in September 2001. Direct-mail volume declined 5.1% in the first half of 2002 to 35.3 billion pieces, but in the first half of 2004 reached a new record of 39.6 billion pieces-helping boost demand for envelopes and printing/writing paper grades from commercial printers.

Among consumer media, magazine advertising is forecast to rise 7.3% to $13.0 billion, following a 6.0% increase in 2004 after picking up this summer. National advertising in newspapers is forecast to increase 6.8% to $8.3 billion following an increase of 5.5% in 2004. Local newspaper advertising is forecast to increase 5.5% to $41.3 billion after growing 4.5% this year.

Yellow pages national advertising is expected to rise 5.0% to $2.2 billion, while local yellow pages advertising increases 3.0% to $12.3 billion.

Electronic media are being paced by internet advertising, which is expected to increase 25% to $8.8 billion this year, following similar sizzling growth in 2004. Television networks are projected to show lackluster 2% growth to $16.8 billion, about the same level as cable TV which is projected to grow 7% in 2005. Spot television advertising is expected to decline 1%.

"The Net is winning over mainstream advertisers with its computational precision," according to a recent a recent article in Business Week. "It delivers hard, quantifiable results measured in clicks and sales-down to the penny. In the process, it's turning advertising from an art into a science."

With its current growth, internet advertising will catch up with the slower-growing magazine in about two years and account for 8%-12% of U.S. advertising by the end of the decade, up from around 5% currently, according to one estimate. In addition to magazines, this growth is expected to be at the expense of television, newspapers, direct mail, and the Yellow Pages.