Moneymen Upbeat At US Adspend Prospects for 2006

25 September 2006

NEW YORK: Although US consumers may be storing their credit cards in the deep-freeze, overall adspend in 2006 is set to grow by 6.4% to $210.9 billion (€164.8bn; £110.9bn), according to Anglo-American private equity and fund management firm Veronis Suhler Stevenson.

VSS, which invests in the media, communications and information industries in North America and Europe, last week published its annual Communications Industry Forecast.

Its crystal ball predicts those industries - stateside if not European - will bask beneath sunny skies for the rest of this year despite a below par performance in 2005 which reflected the lowest growth rate for thirty years - a meager 2.8% to $185.9bn.

Much of this year's resurgence is attributed to diversification by 'old media' Comments VSS executive Chris Russell: "Some of the traditional media companies are catching up by getting products and services into new media - whether it becomes an online version as well or through traditional media."

Pure-play internet spending - keyword search and user-generated online advertising, for example - is forecast to increase 25.8% to $13.95bn in 2006. If traditional media-related online advertising is included, overall internet advertising will increase 26.9% to $22.27bn.

Although the media wilderness has of late been full of Jeremiahs crying woe for TV, Russell is optimistic in the short term despite "some economists hinting at a downturn in the third and fourth quarter. Even years are always the good years," he adds, benefiting from the Winter or Summer Olympics and mid-term elections.

Prospects for the newspaper industry in 2006 are less rosy, with spending forecast to rise by a scant 1.9% to $56.6bn. Opines Russell: "Besides the erosion of the readership and people getting information from other sources, part of it is the loss of the classified, help wanted and all the back-of-newspaper advertising.

"That's clearly gone to the internet - everything from Craigslist to Monster. Having said that, newspapers do have a chance to call back some of that because they're still in a decent position to sell regional and local advertising opportunities."

The VSS report expects out-of-home media to gain 7.9% to $6.80bn in 2006 - both on the traditional and electronic fronts which benefit from extended consumer commute times. In particular digital billboards will achieve double-digit gains.

Says Russell: "What we hear in the industry is that billboards are still performing very well, capturing people in cars. And the community keeps increasing.

"On top of that, when you add the technology impact, some of these ads are still coming from cutting-edge companies who are just using the traditional approach but using screens and different types of advertising billboards."

Data sourced from AdAge (USA); additional content by WARC staff