2005 Ad Spending Projections Jump to 4.8%

In addition to newspapers, categories also being targeted by marketers for significant budget increases include children's media, emerging tier cable networks, place based media, Internet video advertising, local cable TV interconnects, event marketing and sports media.

Marketers have become slightly less bullish on ad spending plans throughout 2004 as the value of the dollar continues to fall, holiday sales struggle, the general economy stagnates and the deficit continues to grow by staggering amounts every day. Ironically, negative news for the general economy appears to be good news for several media as marketers shift funds from research and new product development and cut back on investments and IT infrastructure in order to increase overall marketing budgets. The battleground increasingly is being fought over share-of-voice, with both new and traditional media, event marketing, promotion and direct marketing as the beneficiaries.

A significant shift in spending appears to be underway as marketers and media planners explore alternatives to traditional broadcast television and radio media. Surprisingly, this shift not only represents a potential windfall for online media, but may also reflect a return of budgets to the most traditional of media: local newspapers. Overall confidence in ad spending budgets for 2005 has declined 4.2 percent since last April, according to the most recent Jack Myers Report Advertising Confidence Index survey of advertiser and agency executives. Compared to the same time last year, confidence in spending plans for the next calendar year has declined and plans for overall ad spending growth for 2005 are somewhat less than the 6.3 percent growth we currently project for 2004.

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Based on the new research, Jack Myers Report is more than doubling our original ad spending forecasts for 2005 from 2.2 percent projected growth to 4.8 percent growth, representing an increase in total advertising expenditures for eleven major media in 2005 of $190.2 billion from 2004's total of $181.5 billion. The projected growth in both advertising and marketing investments contradicts the traditional "quadrennial" effect that occurs following Presidential election and Olympics years. A significant contributor to this upward economic shift in media spending is our projected growth for newspaper advertising, which we are adjusting from negative one percent for 2005 to our new forecast of 4.1 percent growth. There appears to be a dramatic return of the auto sector to local newspapers, a resurgence of local retail advertising in weekly shoppers, renewed vitality in the travel sector, and surprising resilience in the classified sector even in the face of strong online classified competition.

In addition to newspapers, categories also being targeted by marketers for significant budget increases include children's media, emerging tier cable networks, place based media, Internet video advertising, local cable TV interconnects, event marketing and sports media. Marketers also appear to be increasing their investments in traditional direct marketing and sales promotion techniques to drive short-term sales, and have slightly more confidence in the growth of these communications tools than they have in advertising growth. We are forecasting total marketing communications budgets will increase 5.7 percent in 2005 to $841.4 billion from the projected 2004 total of $796 billion.

Tomorrow's Jack Myers Report will provide details on the overall confidence level marketers have in the spending plans for 27 media categories, and we'll issue our new media spending growth projections for eleven major media. Below are the forecasts for total advertising, promotion and marketing categories.

Source: Jack Myers Report Advertising Confidence Index Survey, December 2004. Total of 225 respondents including clients, agency media executives, media sales executives and others. Spending forecasts based on client responses for 32 media, marketing and promotional categories. The projected growth in newspaper advertising is reflected in projected spending by client (advertiser) executives but not reflected in the budget planning of agency media executives. Detailed methodology is available by request via return e-mail.