Current Ad Spending Forecasts are Obsolete and Worthless

Originally published October 2010

It's time to completely trash the current ad spending forecasting models used by the media industry, agencies, marketers and investors. I am now in the process of restructuring my industry forecasts and will be re-issuing new data that better reflects the digital revenue potential of traditional media companies, recognizes the integration of digital and traditional distribution platforms, incorporates the growth of interactive and applications-based media, and collapses the historic barriers between above-and-below-the-line marketing communications expenditures.

For example, print-only consumer magazine advertising spending, which declined more than 15% between 2000 and 2010, is projected to decline at least another 10% to 20% by 2020. However, new forecasts being developed by Jack MyersMedia Business Reportwill reflect a radically different magazine industry outlook, projecting that multi-platform consumer magazine ad spending will increase by more than 40% by 2020. This new data will offer investors and corporate management at Time Inc, Hearst, Condé Nast, Hachette, Rodale and the many companies gathering this week at the American Magazine Conference a radically different perspective on their industry's growth prospects.

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Similarly, traditional broadcast network television advertising is currently projected to decline 15% to $14 billion dollars between 2010 and 2020. However, Myers' new data will project 50% ad spending growth, valuing the total multi-platform ad inventory of ABC, CBS, NBC, Fox, CW, Univision and Telemundo content at more than $26 billion dollars in 2020.

Myers advertising and marketing forecasts have historically been the most inclusive, incorporating 19 media categories and an additional nine "below-the-line" marketing categories such as promotion, direct marketing, public relations and event marketing. The leading economic forecasters from major agency holding companies and investment advisors include 12 to 19 media categories, dramatically under-reporting total advertising investments and often completely ignoring several below-the-line budgets.

The integration by traditional media of search, online video, mobile, experiential and social media into their offerings blurs the boundaries between above and below-the-line marketing. Facebook advertising, reported at $1.75 billion this year, is being underwritten from public relations, display advertising, search advertising, direct marketing and promotion budgets. As video is further incorporated into Facebook, how should Facebook advertising be classified? And if nearly $2 billion is included in ad spending data that does not commensurately reflect declines in other categories, it is artificially inflating total reported ad spending data.

Several of the leading forecasters and financial analysts fail to include online video and mobile advertising in their current forecasts. They will in the future. Those who currently include them, such as Myers, have incorporated these digital revenues in separate online video and mobile advertising categories that fail to reflect the percentage of these revenues that are generated by traditional television, radio and print companies. This results in an unfair negative perception of the future shareholder value of traditional media companies and fails to reward them appropriately for investments in digital growth opportunities.

Consumer sales promotion is a $143 billion dollar business in 2010, representing more than 20% of marketers' total communications investments. Most of these dollars are spent for distribution of coupons and product samples, in-store marketing and consumer incentives. Myers projects marketers will increase their promotional spending to more than $160 billion by 2020. A meaningful share of these dollars will underwrite the growth of mobile, apps-based and interactive media, especially as mobile technology enables direct redemption of coupons via mobile devices at retail outlets.

Again, analyses of mobile and interactive media advertising growth that are based on these expanded capabilities but that do not accurately report the sources and distribution of these revenues are using partial and misleading economic insights.

Jack MyersMedia Business Reports' new forecasts (available exclusively to subscribers) are due to be published in early December, and will include at least 29 total media and marketing communications categories. They will collapse the outdated above-and-below-the-line designations to accurately reflect the integration and distribution of marketers' advertising, promotion, direct marketing and social media expenditures. Separate categories are being included for: Videogame Advertising; Social Media; Point-of-Influence and GPS-Based Advertising; Interactive, VOD and Addressable TV Advertising; and Experiential/Event Marketing.

Several traditional categories will be updated, such as Online Display Advertising, which will be revised to "Online Network Display Advertising." This subtle but important shift will enable appropriate financial analysis of the share of display ad expenditures generated by those sites that sell their own inventory vs. the hundreds of thousands of sites that generate pennies from inventory sold through online ad networks.

These new Myers forecasts will include annual data through 2013, and will also provide long-range expenditure forecasts for 2020, to serve long-term corporate and investor planning requirements. Some Myers data may serve as a wake-up call for venture capitalists and investors who are over-projecting the growth potential of early-stage companies and under-projecting the long-term growth prospects of traditional media.