Wednesday, June 13, 2007

Shift to online ads cuts spending forecast

Bloomberg

NEW YORK -- U.S. advertising spending will rise less this year than forecast earlier by TNS Media Intelligence, climbing 1.7 percent, to $152.3 billion, as small businesses limit spending and bigger companies shift money to the Internet and away from traditional mass media.

Worse-than-expected first-half ad sales by newspapers and television broadcasters led TNS to cut its December forecast for a 2.6 percent gain in 2007 spending, the New York-based research company said Tuesday. It said U.S. ad spending rose 4.1 percent last year.

"The soft economy trickled back to the ad market," Jon Swallen, a TNS senior vice president, said in an interview. "A large chunk of ad spending tracks the economy, especially from small- to midsize companies."

Local advertisers are the lifeblood of struggling media such as newspapers and radio and television broadcasters, Swallen said. Their shift to online classified ads in particular has led newspaper publishers to report advertising revenue declines in recent months.

Newspaper advertising spending is projected to fall 2.9 percent this year, while spending on "spot" television ads will drop 5.5 percent from 2006, TNS said. Ads in business magazines will fall 1.5 percent, TNS said, while Web advertising gains will accelerate.

Smaller businesses have been what Swallen called a "swing market" in advertising in recent years, forcing the overall industry to grow when they spend freely and contract when they pull back. In the first quarter, smaller companies increased spending by just 0.1 percent from 2006, Swallen said.

Internet display ads are projected to increase by 16 percent, up from TNS's earlier growth forecast of 13 percent. The Internet now accounts for about 7 percent of U.S. ad spending, said TNS, which doesn't forecast the market for ads tied to Internet search results.

"It appears that total measured expenditures will pose their smallest gain since the 2001 advertising recession," said Steven Fredericks, TNS president.

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