2007 Ad Spending to Increase 3.7%. Traditional Media Growth at Only 1.3%.

Published: January 1, 2007 at 08:10 AM GMT
Last Updated: October 11, 2007 at 08:10 AM GMT

Originally Published: October 31, 2006

Total advertising spending will grow only 3.7 percent in 2007 according to a new forecast being released today by Jack Myers Media Business Report. Traditional media, however, are projected to gain only 1.3 percent in ad revenues as newspapers, broadcast network television and local television will experience revenue declines. Online media, branded entertainment, videogames, satellite radio, cinema, and mobile advertising will generate composite 27 percent growth. Read Jack Myers' detailed overview below.

Click Here to Download Your Print Friendly Myers Ad Spending Forecast

OVERVIEW: New Myers 2006/2007 Ad Spending Forecasts

2006 growth of 28 percent in "new media" sectors spurred overall 2006 advertising growth to 6.8% estimated revenue gains for all media, offsetting conservative 5.0% gains for traditional media. By comparison, however, 2006 will be the "good old days" for traditional media, as 2007 ad spending growth declines to only 3.7% for all media and 1.3% for traditional media categories. Even growth of online ad spending is projected by Myers to slow in 2007.

Television Advertising

Broadcast network television revenues, which are expected to decline 3.0% in 2007, are impacted by the consolidation of The WB and UPN into the new CW Network. Myers forecasts do not include Hispanic networks Univision and Telemundo, which are expected to generate average ad revenue gains of 15 percent in 2007. Fifty-six percent of marketers say they will increase Hispanic TV budgets in 2007. Broadcast networks have opened new revenue streams from their online assets and through DVDs, iTunes and other distribution outlets, offsetting limited ad growth.

Thirty percent of leading national advertisers who were surveyed by Myers say they anticipate reducing their network television budgets in 2007, with 11 percent reporting they will be reducing their network spending by more than ten percent. While 32 percent report broadcast network budgets will increase, most increases range from one to four percent. Only 13 percent of advertisers say they will reduce general entertainment cable network budgets compared to 60 percent who will increase their cable network budgets. All but a small percentage are limiting their increases to under ten percent and overall cable network growth is projected at 4.0 percent for 2007.

Online Advertising

Online advertising investments, while still forecast to increase 20% in 2007, will experience slower growth than in recent years as marketers are uncertain how to exploit the yet-uncontrolled environments of MySpace, YouTube and other social communities that are capturing a growing share of time spent online. Online ad spending increased 30% in 2005 and 26% in 2006. Total online ad investments, including search, will approach $17 billion in 2007, surpassing consumer magazines, which are projected to generate 4.2% growth in 2007 ad revenues. Only four percent of marketers intend to reduce online ad spending while 10.0% project flat year-to-year budgets. Among the 86% of advertisers who intend to increase online ad spending, one-third anticipate increases of ten to twenty percent and twenty percent say budgets will increase more than 20%. Major categories, including pharmaceutical, automotive and telecommunications, project increases of less than ten percent.

Fastest Growing Media

The largest percentage gains in ad revenues are being targeted, say advertisers, for satellite radio (12% growth), mobile advertising (100%), videogame advertising (90% growth), and branded entertainment/product placement (35%). Cinema advertising is projected to grow by 15% after two consecutive years of 20% growth, and custom publishing is being targeted for 14% growth.

Slow-Growth Media

Media experiencing declines and slow growth are local/spot television (-5.0%), broadcast networks (-3.0%), newspapers (-1.8%), yellow pages (+0.5%), broadcast syndication (+1.0%), terrestrial radio (+1.5%), and business-to-business magazines (+3.0%). Local television stations, which are forecast to experience the greatest year-to-year declines due to heavy political ad spending in 2006, will see a 3.2 percent gain over 2005 ad revenues.

Marketing Communications

Non-advertising marketing communications investments are also projected to experience limited 2007 growth. Event marketing is the most robust marketing tool, according to Myers' forecasts, with 15 percent projected gains for 2007, followed by 7.5 percent growth for public relations and 6.0 percent increases in direct marketing. Trade and consumer sales promotion, including in-store media and slotting allowances, are projected to increase 3.5 percent.

Specialty Television

Among the different specialty categories within the television medium, place-based video media are projected to grow six to seven percent. Sports TV will outpace overall TV ad spending growth with four to six percent gains. News television will be flat to plus 2.0 percent. Kids TV and network daytime TV are projected to be flat to slightly down in 2007. Five percent of major advertisers say kids budgets will be reduced by more than 20 percent. On-demand television remains a year or two from meaningful focus by advertisers.

Methodology

Jack Myers Media Business Report surveyed more than 100 advertisers and 300 media agency executives in October. Data from advertisers only is used for ad expenditure forecasts, with agency results used for guidance and direction. Myers also aggregates data from multiple sources, including GroupM/Mindshare, Zenith Optimedia, Veronis Suhler, and numerous proprietary sources.

For more information and details from the Myers research, contact Jack Myers at JM@jackmyers.com

To communicate with or to be contacted by the executives and/or companies mentioned in this column, link to JackMyers Connection Hotline.